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

It’s not about you making a profit or loss — it’s about being protected from something catastrophic. Yes, the average person will pay 10% more in premiums than they see in claims benefits over their lifespan, but you’re protecting yourself from your house burning down, a car accident that totals your car and other while causing injuries, from getting cancer or needing an organ transplant which each might cost the insurance company many times what you’ve paid them.