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

Of course… That’s why they are in business. And there’s nothing wrong with that. The whole point of insurance is to take a small loss, on the off chance that you might need assistance. It’s a strategic loss. Sure, health insurance might cost you $5000 a year. But one surgery might cost you $100,000. You are deliberately taking a small loss, as a risk mitigation strategy, to possibly avoid a huge financial hit. In fact, you are *hoping* to never cash in on insurance. And no, that’s not a good reason not to buy insurance. Insurance is important.