Insurance policies offer ”Asset Protection” against economic loss, which would be a loss calculated in a purely monetary fashion, a loss which can be measured in financial terms and remunerated by cash. For example, an insurance policy can pay for the cost to repair or replace a damaged automobile or to rebuild a home damaged by fire, for the cost of medical treatment for an injury or illness. The purpose is to make the injured party, as nearly as possible, whole again, as if the loss had not occurred.
It is important to understand the limitations of insurance. There are many types of losses which money cannot compensate for. For example: insurance cannot replace a life or take away the emotional injury or pain which often accompanies a loss, nor for the "sentimental" value of an item of property. When you buy homeowners property insurance, for example, you are insuring only the replacement value of the home and its contents, being the cost to repair, build or replace minus your deductible.