How do insurance companies profit?
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Answer: Usually, the things they cover have been studied. How often they happen. Who they happen to. How it happens. How much does it cost to “make up for” it when it happens (replace stolen item, burned-down house, wrecked car), etc.
People who are good in a maths called Statistics and who research such things set how probable (“probability”) that those things will happen, and price insurance to cover folks for those things. If they did their jobs right, out of all the people who have insurance, only a small percentage will ever have those things happen to them, and an even *smaller* percentage will have to be paid out for them.
What happens to the money paid by all the *other* people who *didn’t* suffer any losses or make any insurance claims? The company keeps the “extra” payments (“premiums”) as profit, after paying people in the company, and other insurance companies that cover *them*.
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