What is insurence?

Sort of like a bet. For example: life insurance, the company bets that you will live to the normal life expectancy, you bet that you wont. If you die young, you (your inheritors) collect a large amount while having paid little, therefore "you" win. On the other hand if you live a very long time, you will have paid a lot, and the amount collected will be worth less than it did when you first took the policy, therefore "they" win.

==Answer==

For other kinds of insurance, like home, auto, renter's insurance, you are paying for protection against risk. You pay the insurance company to protect you against the risk of loss due to damage to your car, for example. You continue to pay even though you aren't experiencing any accidents, because you are still subject to the 'risk' of accidents. Actuarial experts help insurance companies figure out how to balance protection against risk with held reserves to make large pay-outs, and with the need, of course, to make a profit. With this kind of insurance, a risk must exist in order for the company to legitimately charge a premium. If there is no risk, or if the risk ends, there is no contract and therefore no insurance in force.

First answer by ID1128746086. Last edit by Emdrgreg. Contributor trust: 986 [recommend contributor]. Question popularity: 11 [recommend question]