How do insurance companies profit?
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The insurance company, based on historical data and probabilities, estimates how much money they’d have to pay out for any given event among their customer base and how frequently those events happen. They charge their customers a monthly rate to pay for those expected “losses”, plus extra for profit.
The customers get the peace of mind that, should the worst happen to them, they will get compensated by the insurance company.
The insurance company gets a very steady income, with hopefully small and infrequent payouts.
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