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?

Question

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

Answer 1

Yes. But there are still situations where insurance is useful:

– The law requires you to have insurance.
– A contract requires you to have insurance (often mortgage or auto lease).
– You would be unable to pay if you get unlucky.
– Certain situations involving death (e.g. your assets often get tied up in court when you die, but a life insurance policy is usually paid out quickly)