Insurance is about balancing risk through a payment that guarantees a return. You give up some amount of money up front (a premium) to buy protection against the possibility of a larger loss. Take the following quiz, provided by the National Endowment for Financial Education and see how much you know about risk and insurance.
Now that you know a bit more about insurance, think about your own comfort with risk. You will be confronted with several types of insurance over your lifetime (car, health, mortgage, homeowner's, renter's, life, disability) and you will need to know how much you value security against loss versus up front payments. Download the following exercise on insurance to help you get started.