Why do we need insurance? Insurance is a way of managing risks. When you buy insurance, you transfer the cost of a potential loss to the insurance company in exchange for a fee, known as the premium. Insurance companies invest the funds securely, so it can grow, and pay out when there’s a claim. Insurance Helps you own a home, drive vehicles, maintain your current standard of living, cover health care costs, provide for your family, run a business, or even take vacations.