101–110 of 328 posts
Earlier quoted context omitted.
Same as if I buy a 10-year term life insurance policy and don't die during that decade. I lost all of the full premium paid.
You will live those 10 years with more peace of mind, which is the only reason to have life insurance since once you're dead you're dead
Earlier quoted context omitted.
First off thats just reinforcing the grayness of the difference. Where exactly on which exact bell curve does gambling stop and insurance start? Second, the one thats even more ambiguous is insurance from the perspective of the insurer. It's just gambling with a payment plan, that HOPEFULLY doesn't turn into a ponzi scheme.
There's no bell curve. Insurance is hedging against the value of something you have an interest in (which takes the form of a bet against that thing). Gambling is betting on a thing. So a short option on a stock (betting against it) would be: a) insurance if taken out by the company, or a shareholder, or someone with stake in the business b) gambling if done by a random third party There's a moral component to the de…
The only confusion comes from people who bend over backwards to convince themselves they aren’t gambling because of weird “it’s a sin” morals that leak into their mind.
Betting against a company by shorting has no different moral component than betting on a company by investing. Either way you aren’t doing work and are taking risk to get a higher return.
Insurance products have different risk curves but they are still gambling. Someone can buy a ton of garbage houses, buy bunch of insurance, and just hope they burn down for the payout.
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I would express it differently. With insurance, you are guarantee to lose. To insure against a 10K risk, you have to pay 20K. 50% of your premium goes towards staff, advertising, profit, etc. But you reduce variance.
> With insurance, you are guarantee to lose. No, you're not. There is no guarantee that your payout on a claim will be less than the value of the premiums you paid in at the time you make the claim. Averaged over all people being insured, that will be true, but you are just one person, not the average of all people. > To insure against a 10K risk, you have to pay 20K. No, to insure against a 10K risk, you pay some mu…
With insurance it’s very difficult to get more than the market value out of the destroyed thing on payout. Even if you ignore premiums you’re usually just breaking even. This isn’t a law but it’s something insurance companies wised up to pretty quickly because the incentives get pretty attractive to commit insurance fraud when there is profit involved.
agree, this is definitely describing something that is little talked about but very central to economics. there is a book by the Gangs of New York author called Sucker's Progress: An Informal History of Gambling in America (1938). The relation between insurance and gambling used to be even more blurry. Even the terminology. The word "Policy" for example. https://en.wikipedia.org/wiki/Numbers_game Even the mathematica…
Not often, but it does. See AIG
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Yes, you always lose a bit of money with insurance, but life isn't all about money, whereas the whole point of gambling is winning money. Insurance brings other benefits that improve your life.
> Insurance brings other benefits that improve your life. What other benefits besides the money that covers the losses?
Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…
Having insurance is gambling, but not having insurance is also gambling. This is because life itself is a gamble. We don't know what the future holds and we have the choice to insure or gamble on just about any aspect of our lives. Insurance companies are just like casinos in that the math always favours them if you look at a sufficiently large sample size. Even so, some things are still worth insuring. e.g. Your hou…
The math changes though if you are dealing with a non-profit insurance system. For example, becoming a member of a well designed co-op, or a genuine non-profit insurance company (one that returns excess to members rather than pay bonuses to executives). But still there are problems, since not every member brings the same amount of risk, so you get a good deal if you know you are higher risk than the insurance company believes and vice versa.
Gambling isn't wrong. Gambling is stupid . Hedging risk is not stupid. That's the difference.
Insurance is different from gambling because if you pay and things go well, things go well. If you pay and things go badly, things go a lot less badly. In fact, insurance is the exact opposite of gambling. Gambling is all about risking it all. It's an activity that sits at the extremes of the bell curve. You win it all, you lose it all. Insurance on the other hand is a small price you pay that, through statistics, al…