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

Think of it like a bet.

You’re betting that your house will burn down, and the insurance company is betting it won’t.

If you “win” the bet, the insurance company pays out to you. If you “lose” the bet, then you pay a much smaller amount to the company but also you still have a house.