>I don’t care how cheap the policy is, I’m assuming they’re charging more than they payout on average.
How would an insurance company stay in business if it were any other way?
How would an insurance company stay in business if it were any other way?
> Insurers receive premiums upfront and pay claims later. ... This collect-now, pay-later model leaves us holding large sums -- money we call "float" -- that will eventually go to others. Meanwhile, we get to invest this float for Berkshire's benefit. ...
> If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money -- and, better yet, get paid for holding it. Alas, the hope of this happy result attracts intense competition, so vigorous in most years as to cause the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. Usually this cost is fairly low, but in some catastrophe-ridden years the cost from underwriting losses more than eats up the income derived from use of float. ...
What I’m saying is that since the same investment earnings are available to the premium payer, it is true that the insurance company charges more than they pay out, hence the original poster is right in avoiding insurance whenever they can (i.e. they can afford to pay for a loss they might have been planning on purchasing insurance for). All they need to do is invest it in one of the many nearly free index funds, and they’re in the same boat as the insurance company, but without having to pay for the salaries of the insurance company’s employees.
1) come along later
2) not be wel reimbursed (eg: 60%), so if it can wait, many will until they have employment and better coverage.