Insurance is Gambling
As a young man, I worked for a company that held a yearly sales competition!
For the first year’s prize, the top 13 agents received an all-expense-paid trip for two to Las Vegas, NV.
During this trip, one of my colleges considered himself a “professional” high-stakes gambler. For the sake of this story, we’ll call him Harry (not his real name).
Harry thumbed his nose at the old saying…
Only gamble with money you expect to lose.
On the very first day, our boss called a meeting and Harry didn’t show up for it. The boss told me to go find and tell him to get his you-know-what to the meeting, immediately.
I went downstairs and found Harry sitting at a blackjack table. He had a huge grin on his face and a huge pile of chips on the table in front of him.
He exclaimed that he had won over $25,000 so far!
I told him what the boss said. But as I watched, he hit three blackjacks one right after the other. He said to tell our boss that he’d come to the meeting late. But he never showed up. Our boss was mad.
The meeting lasted about two hours and as soon as it ended, I rushed downstairs to see how Harry was doing.
He was still sitting at the blackjack table. His grin was gone and so was about half of his pile of chips.
To make a long story short, he ended up losing the $25k. And on top of that, but he also lost over $20k of his own money.
The odds are always in the house’s favor.
There is not a bet in any casino that has a 50/50 chance for the gambler to win.
So, the casino knows they will always win in the long run.
Some people may win short term, but if they sit there long enough, they will end up giving it all back and then some.
It’s called “bookmaking”. The average person doesn’t understand the mathematics of bookmaking. The term comes from the practice of recording wagers in a hard-bound ledger (the ‘book’).
The bookmaker, or the “house”, ensures that the odds on every bet are in the house’s favor.
Insurance is nothing more than gambling. Insurance companies make money the same way a casino does… “bookmaking”.
You are placing a bet every time you pay premiums.
And insurance is one bet you hope NOT to win…
Because the only way for you to win is to lose; usually to suffer a catastrophic loss.
Don’t get me wrong, insurance is priceless when you suffer a catastrophic loss. But an insurance policy is a worthless piece of paper until you need it.
Remember my friend hapless Harry, though, and only gamble with money you expect to lose.