Quote:
Originally Posted by BGM
You can't equate insurance to gambling. So, why insure your house, your car (other than be required to carry certain coverage), your homeowners's insurance, etc. It's for peace of mind. It's for the convenience of not having to shell out a lump some of money at one time if you don't have coverage and something happens. Obviously not everyone has claims hence why insurance companies are still around. Most people aren't going to sock away $2K for their "tire replacement fund" to be used 2 years from now--most likely other expenses come up that you will be use that money for.
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Actually, insurance IS gambling. You, the buyer, are betting (gambling) that there will be a claim (ok, you are
concerned there will be a claim. This is the same thing and is only semantics).
The insurer is betting that you won't have a claim, or that your claims' value will fall short of the cost of the policy (overhead etc) and still leave a reasonable profit.
There's nothing wrong with that; it's the way of business. When we buy life, car etc insurance it is because we judge that we (or our family) could not afford to bear the cost of any potential loss, hence we shift the risk to the insurer and pay them a premium for their risk. They, in turn, profit by spreading the risk around and paying out less than they take in. The day they pay out more, guess what happens? The House Has to Win the Game, or there IS NO Game.
Ever try being 80 years old and getting a new life insurance policy? Ever been dropped for too many claims? Ever been denied because you're 18, male and a poor student who maybe got booked for possession once? It's all about the betting, as there are no certainties in life, only that the past is the only indicator of the future, however imperfect that indicator may be. Enter: gambling.
Most if not all the insurances above are taken out to avoid catastrophic losses, such as a home, a breadwinner's life, etc. IOW, losses which the insured cannot reasonably pay from out of pocket. Insuring $1-2K worth of tires on a $60k car (ie it's all about proportion) is crazy, and digs deep into the most basic of human psyches - Fear of the Unknown, and the argument completely breaks down in the face of logic. For me anyway.