Eli5: How does insurance work ? How is it a good deal for both the customer and the company ?
In: Economics
For the customer it’s a good idea because in the event of damage or a crash that requires a lump sum available on hand for repairs or replacement the insurance company takes care of it for them. Of course it’s worth noting that since insurance is legally mandated it’s not that great of an idea for anyone who actually has money lying around but they’re forced to get it anyways. They also pay out victims of crashes.
For the company it’s a good deal because they’re betting that they’ll collect a lot more money from premiums than they’ll have to pay out, so it’s a net profit.
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