My cousin and I are going to try to start a business so we needed insurance. The insurance is a 160 something dollars a month and covers 2 1,000,000 dollars accidents. Where do they make there money?
In: Economics
Insurance works by having a lot of people paying small amount (premiums), and paying out large sums to very small amount of people.
If a lot of people need a payout, then you got a problem. Either the world is ending, or the insurance is going to go bankrupt.
Insurance companies also buy reinsurance policies from other insurance companies in the event that they have to payout large amounts.
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