What i don't understand about insurance

how does giving $5 to an insurance become $100 in coverage? how does money just get conjured up like that? if insurance companies negotiate lower prices like some people say, why does healthcare have bigger annual price increases than almost everything else? maybe i don’t understand please explain it to me.

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Because healthy people also pay for insurance but never need to use it.


As for healthcare costs, it’s a bunch of ■■■■■■■■ and greed.


but i looked at one life insurance plan, even if i started paying monthly premiums at birth and lived the average life expectancy of 78 years i wouldn’t pay enough to equal the $250,000 coverage. are immortal beings buying life insurance?

No idea. I don’t know anything.

and why do people with insured homes damaged from superstorm sandy, hurricane katrina, etcetera complain about insurance companies?

Oh, don’t worry about insurance companies, they are not cutting anybody a break. They’re not cutting anyone a good deal. Simply put, they have 5000 or 10,000 clients paying 10, 15, 30. a month for forty years for stuff like protection if you hurt yourself at work or for fire or earthquake insurance but in the majority of the cases that stuff never happens to the average Joe.

So basically they make their profits by taking in all these seemingly cheap premiums for forty years so they give you all this coverage and then they never pay anything out to the majority. It’s just like gambling in Reno or Las Vegas. The odds are all with the house.

They love to offer seemingly cheap dismemberment coverage in case you get your leg or arm cut off at work but how often does that really happen? I’ve been working various jobs for 35 years. I’ve never seen anyone get their arm or leg or even a finger cut off but people will pay $25 a month for fifty years in case it happens and they end up the same as a anyone who doesn’t have insurance. It’s a sweet racket for insurance companies. I think P.T. Barnum said it best: “There’s a sucker born every minute.” Don’t be one of them.


Investment. Same as the banks. This is why most bamks love insurace companies or have stock in them and vice versa.

Insurance companies and banks and most big bussineses invest some portion of their profits. This adds extra points to their shareholders stocks.

The more growth of stocks, the more investors will buy them. How quickly a share of stock grows is important too.

So yes, businesses invest the sameway individuals do.

And one member here has made an important observation. Making payments is a solid source of income for most businesses IF they can get enough people to make monthly payments(for any reason).

Think of all the monthly payment we make. Add to that, some ofbthose payments contain a predetermined amount of interest, such as an auto loan or mortgage.

But really any thing that requires monthly payments is reguarded as steady income by creditors which is basically another term for business.

If we want more money for ourselves, we look aroumd at our budget. We try to find a way to not make monthly payments or as few as possible.

This often envolves paying things off, combining 2 or more bills. Some of us insist on never starting monthly payments in the first place- for some items.

Savings accounts coupled with investing allows people to buy big ticket items for “cash prices”.

Examples are:
home appliances
smaller homes
undeveloped (farm) land

We cant escape all monthly payments, but it is best to save up then buy what is needed outright.

I’d like to meet the stock, bond, commodities, securities, etcetera person who can get a thousand percent return on investment. that has to be an interesting person.

Insurance is a racket for sure.

I’m still going to offer Homo Sapien Mass Extinction Insurance. Just in case. It’s cute but some would go for it without thinking about the absurdity. :slight_smile:


Oh they are, they are I tell you. just joking

but have you ever thought about fees like annuities an pensions wise?

It really is a lot like that Superman and Ofice Space scheme scene.

You would not believe what they make for managing those.

the teamsters pension is bankrupt. detroit pensions are bankrupt.

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They also have lots of people pay insurance for many years then drop there coverage. Some claims are never filed by also some companies are not there when your family goes to collect. It is also a bit of a pyramid scheme of sort as they are growing taking on new customers and mostly only the very old customers are collecting,while they are still growing bin numbers. So like everything else our kids generation is probably the ones that will get screwed out of there Share.

Having been a licensed insurance broker for nearly a year and a half, I do have some thoughts. I’d just like to qualify this by saying that I don’t speak for my employer and I’m only speaking for the province in Canada that I’m licensed in. Finally, my areas of expertise are commercial property and commercial auto insurance.

One of the basic principles behind insurance is this: Spreading the losses of the few amongst the many. Insurance companies allow large numbers of people to pool their money efficiently in such a manner that they cover each other for ruinous losses. Insurance is really a community of people helping each other overcome catastrophe.

The other basic principle is indemnity. When you are indemnified, you are left no worse off and no better off after a loss. The purpose of indemnity is to set things right and leave you where you were before the loss occurred.

I’d have to say that the insurance market I work in is very fair for the most part. Insurance companies usually pay out in a reasonable amount of time and the settlements are in line with replacement costs. I am aware of one instance where an insurance company we’re a brokerage for screwed a family after a fire (they shorted them on repairs). We haven’t written a single farm policy with this company since and we make sure they know why, and that their rep isn’t welcome in our branch until they’ve set things right with the family in question. The $8000 they saved on the settlement has cost them at least $60,000 in new premium, last I heard.

In those cases where payouts aren’t considered fair, there is usually a well-established dispute process that is presided over by a neutral arbiter. Insurance is a very highly regulated industry and those who are licensed in it are held to a higher standard of conduct than the customer making a complaint. Courts generally err on the side of the insured rather than the insurer. Insurance brokers also get caught in the crossfire so we document like crazy.

In my time in insurance I’m only aware of a few cases of unfair payouts. I’ve seen many more payouts that left the insured better off. I’ve also seen my share of fraud attempts. They greatly outnumber any incidents of malfeasance on the part of the insurance companies. Many of these are caught simply because the idiots brag up what they’re doing on Facebook, or post information that invalidates the claim.

When people aren’t outright trying to scam you, they’re less than forthcoming. “How’s your license?” “Clean.” Uh, no. We pull a driver’s abstract and it looks like a demon’s resume. Pretty hard to forget two DUIs in two years, jerk. Insurance is an industry built on trust. My side of it really works hard to make sure customers are informed and know everything they want to about their policies. We’re always VERY happy to sit down and go through a policy document with anyone who asks. I wish more of our clients would reciprocate this.

Here’s what trying to write an auto insurance policy looks like from my side of the desk WAY too often:

As to insurance companies investing, hell yes. If it weren’t for the profit from their investments (which are regulated as well to make sure they’re low risk and companies have access to enough capital in the event of a disaster), your insurance would cost more. A lot more. Most people don’t realize how unprofitable auto insurance is now. Think about it – your entire car is now a crumple zone. You can take out the front end by sneezing hard these days. Those bumper covers embedded with backup sensors? At least a grand to replace now. We’re starting to see large insurers refuse physical damage coverage to those with poor loss histories to keep costs down for those who are more responsible.

I don’t know a lot about life insurance or pensions, but this is what I’m seeing from where I’m working. Since I’m likely the only SZ here who works in the insurance industry, that’s my two cents.


doesn’t lower risk equal lower reward?

Lower risk is reflected in lower insurance premiums charged. As the risk increases – and insurance companies have massive amounts of data they can use to quantify this – they charge accordingly. Example: I’ve seen 20 year olds pay $20 for travel/health insurance for a weekend in Vegas. I’ve seen a $65 year old with a heart condition pay $350 for the same coverage on the same trip.

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we must simply be fooled by all those attorney commercials. we’re not listening to the people we should, the people who say insurance is good, the people selling it. when i want the truth about something i go straight to the source usually, ask the person selling it.

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There are many places that still do annuities pensions.

But no I did not know about the two you mentioned. I hardly ever get around to reading business news that would contain that information.

I am getting the feeling this post was motivated by your premium cost and not just wanting to know how insurance works?
Do you live in USA?(for your privacy, please dont tell us your locaton such a city county or state.)

I am not really up to date on America’s ACA. but some of the funding for it was canceled in Oct. of 2017.

Or at least thats what I read. You will do well to verify this though. It was predicted, in those articles, that the partial defunding would raise premiums till about 2020.

If I remember right, I think the term was “shared cost reducing” for the part that was defunded. It mostly affected those with a silver plan, but all were affected.

This defunding will affect deductables and co payments for silver plan customers.

They will now have to pay the whole deductable or copay. It is the insurance companies not getting reimbursed, because of defunding, that is raising premiums for all.

This is all to the best of my knowledge anyway.

i may be smart but i don’t know everything.

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