You know that unexpected things happen and cause you trouble. The dog eats your homework. You spill a quart of milk on the kitchen floor.
But some accidents or unexpected events are more serious and can cost you money. You skid on wet pavement and wreck your bike. You leave your backpack on the bus, and no one turns it in.
These events are called “losses.” You no longer have a backpack or a bike. Who replaces these items? What if your parents say that you must replace the lost backpack because you were careless? Do you have enough money saved up?
Losses occur in the adult world too, and sometimes losses happen without anyone being careless or making a mistake. A rainstorm floods your basement and ruins everything in it. Your grandmother needs an expensive operation. Someone steals your dad’s car.
All these problems cost money. If they all happened at once, they might wipe out the family savings. Adults try to protect themselves by buying insurance, a kind of protection that helps people pay for losses that occur in life.
This section explains a few of the different kinds of insurance and how they work.