Eli5: If an insurance company is willing to sell you insurance, does that mean the insurance company is expecting to make profit and therefore you will make a loss and should not take up insurance?
In: Economics
Someone else in this thread suggested that you think of insurance like a bet, which isn’t exactly the case. Insurance doesn’t let you make new bets. It lets you remove bets that exist naturally. Without insurance, there are some states of the world where your house doesn’t burn down (you win!) and some where it does (you lose!). With insurance, you always make insurance payments, and you always have a house (because the insurance company will buy you a new one if it burns down). You went from an uncertain outcome to a certain one. To the extent the insurance company makes a profit, that is your payment to them for removing that uncertainty from your life.
Most people aren’t gamblers, so they don’t seek out new bets and would prefer to eliminate the natural ones. They buy insurance. If you ARE a gambler, go ahead and don’t buy insurance. In fact, you might even be able to up the ante if you can find someone who will give you money now but take it away if your house burns down.
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