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

A lot of insurance companies actually don’t make a profit directly off the premiums they charge you: they make their money from investing the premiums in between when you pay it in and they have to pay it out to cover a claim.