Question

How is having insurance important for successful financial management?

Answer 1

I dont have much knowledge in this area.
But insurance is basically risk-sharing.
A famous example used to explain this simply is that four merchants used to send commodities over sea in their separate ships.
If any ship drowns then he/she would sufffer loss of entire inventory.
Hence they decided to send the four ships with each ship carrying 25% of each merchants goods.
Thus if any ship drowned then all would suffer but suffering would be limited to 25%.
If you see this on an individual scale then in first case of separate ships you have a possibility (a risk) of losing all.
In second case,you do have risk but it is shared therefore individually you have a risk of losing 25% or 50% of your goods because probability of all 4 ships sinking is much less than probability of 1 or 2 ships sinking.

CONCLUSION
Basically,insurance is important in financial management because you are performing RISK MANAGEMENT
And as such ,any business involves risk because you cannot foresee every event with certainity
Therefore there is a PROBABILITY of those events happening.
You are managing risk,which is sort of making adjustments by seeing the probability of those events happening which could harm you.

I am also a student and learning these concepts.
This is how much is know.Get it verified too.