Is insurance just a big scam?

If every person paying in got more out of it...there wouldn't be an insurance industry. The point is to hedge yourself against a unlikely but possible massive expenditure by paying small chunks over time. Think paying 1k per year for 10 years to account for a 10% chance of losing 100k during that same period. The long term outcome of these is the same
(both yield a 10k loss if simulated over and over), and you wouldn't need to ever put out 100k. After that calculation, the insurance industry takes their overhead + margin.

Some things make sense to insure (health, car, life, business, etc) because the losses potentially have HUGE impacts. Some things don't make sense to insure ($20 toaster oven) because the loss has minimal impacts.

Yes. Insurance is a crooked game. When they owe you money, they try to hide and screw you over any way possible. They overcharge and steal money from everyone else. Mandatory in many places. It's not even a gamble for them because, unless everyone is putting in a claim, they will come out substantially ahead. How could people be okay with taking others money like that? It's pretty close to "justified" theft in the first place, but their tactics beyond that are evil and egregious. There's individual behind them who always love to hide and are averse to accountability. Lot's of company name changes and authority figures not putting their name on it.

My house burned in a wild fire (total loss). I would have been out half a million without insurance that I paid about 1k a year for for like 2 years. So it cost me 2k to not lose 500k. So yeah, insurance is worth it.

On average individuals do not benefit. In specific they do - like say your house burned down because of a lightning strike. Without insurance, you could be f'd. 100,000 people could be better off without car insurance, having saved money, but the one guy who's house got hit by lightning, not so much. So its up to you do you pay for peace of mind or rest easy knowing you can put all the money you saved toward a vacation or something.

Sounds like a personal choice you made living in a wild fire area. Why should my rates go up to cover the 498k difference?

Same goes for FEMA flood "insurance." Let's rebuild everyone's houses in Galveston for the fifth time...

It is not a pyramid scheme. You don't seem to understand what a pyramid scheme is if you think paying for insurance is a pyramid scheme. It is something that protects you from being overwhelmed financially if a disaster were to happen. There was just a huge house fire in my neighborhood a few nights ago. House destroyed. The house is worth maybe $400,000, but the owners have been in it for decades, so they probably paid a third of that for it. Home insurance will replace it.

Car insurance is required in most states. Life insurance is not required. It is recommended if you have dependents or a spouse who would be destitute if you died. We bought term life insurance when we were in our 20s, and my term ran out when I turned 55, and my wife's will run out in a couple more years. We will not replace it, because we are now wealthy and there is no need to.

SOME kinds of insurance, mostly "extended warranties" should not be purchased ever. For most of those, it would not be a financial disaster if you didn't have it. Even extended warranties on cars should be avoided. In the long run over your life, you are better off never having paid for ANY extended warrant on anything, even if one big thing one day goes bad. I saw someone one agree to buy the extended warranty on a small kitchen appliance that was half the cost of the thing itself. Nuts.

Try spending a week as an in patient in any hospital and you have no isurance.

Good luck!

I have have two cars stolen in my lifetime with no insurance it is simply....see ya! With insurance I was about to buy another vehicles with less miles on it.

Your house burns down without home owner insurance, guess what?

You must have insurance unless you are a multi millionaire. Yep, with that kind of $$$$ forget insurance.

It was in a residential neighborhood suburd. It's not exactly in a remote wild fire area. It just happened to have been an enormous wild fire that could be controlled.

What if it was any other of the dozen reasons it could have caught fire? Would that have been acceptable to you?

I'll bet a million dollars you have homeowners insurance. Also, I'm glad you personally subsidized it. I hope your premium continues to go up.

Insurance is not a pyramid scheme, but like gambling the house typically wins. However, insurance companies fail more often than you may think. Property insurers in TX, LA, and FL have been hit very hard recently. Weather events combined with shady public adjusters, contractors and lawyers are causing massive losses which get passed on to policyholders in rate increases. Some companies can’t raise rates quickly enough and go out of business.
There’s a reason the big guys like State Farm, Allstate, and Farmers don’t insure many homes in FL.

Houses don't catch fire on their own. Try being more careful. You probably lived in Colorado or something.

In many cases insurance companies don’t make much (or even lose money) on the policy itself (‘underwriting’), with the core of the business being earning investment returns on premiums held before being distributed for claims (‘float’) which tends to increase over time (even if you’re breaking even on underwriting / policies) as long as you grow and write more policies and hold those policies’ premiums for a period before claims are paid

So yes for the most common types of insurance, it’s very competitive and the public gets a great deal

If you're a licensed professional like a doctor, lawyer, or engineer, you better have professional liability insurance (and are usually required to) because one frivolous lawsuit could clean you out in legal defense costs alone.

And of course the person who wrote about about the ‘hedge’ value of insurance and protecting against catastrophic loss is spot on

I'm happy with my homeowner's insurance. It costs less to insure my $600k home than my $30k cars because the odds of a claim are much lower. And the car insurance isn't that bad considering an accident could cost me $200k. Of course the insurance company is making money and the money to them is more than the expected value from them. That's how it works. I've changed insurance companies a couple times in the past few years. I was happy with the old one, but the new one offered me better coverage at better rates. True free-market.

Health insurance is way bloated because of our massively inefficient pseudo-free market combined with socialist system. Very few choices and we're supporting all those who get free coverage. And health care would be really expensive even if it was free market.

For employees, at some jobs, group health insurance is awesome. At most big banks, health insurance and dental insurance are outstanding. Group term life insurance is always a good deal. Besides group term life insurance and group health insurance at some large corporations, insurance usually is a racket which benefits insurance company and not individuals insured.

Brien evens, Every location has some type of risk. Does your place of residence have zero risk?

AP5000, you’re arguing with someone who can’t seem to comprehend that disaster can strike anywhere.

this is why insurance premiums are calculated depending on the risks associated with whatever is being covered.

if you live in an area more prone to hurricane, you pay a higher premium for that. If you have some type of heart condition and are in your 50s and try to get term life insurance, premium will be very expensive.

Also, why are you thinking like you’re responsible for paying for that? Insurance company decides if they they want to cover certain situation. If they deem too risky, they can decide to not cover. Or, they’ll ask for higher premium. Don’t worry, insurance company will find ways to still take your premium. Successful ones make great money so don’t think like you’ll be paying less premium if risky situations are not covered.

Are you of the mind that some locations are not riskier than others? Wild fire areas, flood zones should not be built in. You need to take some personal responsibility for decisions on where to live. Building on a cliff overlooking a CA beach is not a good idea. You will never pay enough in premium to offset the cost to others. Hence you're a burden.

Insurance is not a "big scam." It is a service available to people who want to buy it. If you consider yourself having been "scammed" into buying an insurance policy before, that's on you. Nobody is pointing a gun at your head and making you buy insurance; in most cases it's at your discretion, except when it's mandated by law (like auto liability insurance) or somebody you want to do business with insists on it (your mortgage company insists on fire insurance; a company hiring you insists on errors and omissions and other forms of professional coverage).

When it's your choice to make, you should buy insurance to cover losses you can't (or prefer not to) afford, and not bother with insurance for losses you might find irritating but won't break the bank. In our case, we have not bothered with auto collision or comprehensive insurance in many years because we usually drive used cars we could replace with cash on hand if we had to. But home insurance has come in handy in offsetting major losses more times than I would have liked. In about 30 years of owning our own home, we have had claims for basement flooding (burst pipe), a major storm that killed power for ten days, two burglaries, three stolen bikes and a lawsuit for an incident that happened during a run. I've probably paid ~ $30-40k over ~ 30 years in home insurance. The lawsuit on its own had a chance of costing much, much more than that (I don't actually know the settlement amount, they wouldn't tell me).

The insurance industry gets a bad rap, sometimes justifiably, but my experience has been mostly positive. And when major disasters strike, those companies by and large step up pretty hard.

Lol, op perfectly exemplifies LR logic - can't see the forest for the trees. Maybe you should also consider this wonderful political movement called libertarianism.