What is one key impact of understanding risks and insurance?

Understanding risks and insurance plays a crucial role in improving financial security. When individuals have a clear grasp of the risks they face—whether those are related to health, property, liability, or other areas—they are better equipped to make informed decisions about the types of insurance they need. This understanding allows individuals to create a safety net that can protect them against financial losses arising from unpredictable events, such as accidents, illnesses, or property damage.

By having appropriate insurance coverage, individuals can mitigate the financial impact of these risks, leading to enhanced peace of mind and reduced vulnerability to unexpected expenses. This heightened sense of security enables individuals to focus on their financial goals without the looming fear of potential financial ruin due to unforeseen circumstances. In contrast, while aspects like credit ratings, health complications, and investment returns are important, they are not directly addressed through the comprehension of risks and insurance.