No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically.
1. Know your insurance contract, know what's actually covered and what not (sometimes describing the same facts in two different yet truthful ways will result in your claim being accepted or denied) and have a non-shit insurance company (check reviews that talk about how they handle claims or ask friends that had claims).
2. "Self-insure" risks where the variance won't hurt you. In other words, if you can grudgingly eat the loss if it happened, don't get insurance and eat the loss if it happens. If you have a lot of disposable income, you don't need insurance for something that won't noticeably shift your budget. Likewise, pick high deductibles. What would you rather do: Eat a $300 loss, or have paid $200 in additional premiums and spend two hours of filling out their paperwork?
3a. An exception is if you just really want the peace of mind, are willing to pay for that, and think you can find an insurance company that will actually pay.
3b. Another exception is if you think they miscalculated the premiums. I know that this is unlikely, but it ties into the "peace of mind" criteria - if you think a risk is more likely than it actually is, just insuring it might be an easy way out. The premium might also be accurate for the average, but you might also think or know that you are at a significantly higher risk than average.
For the latter two points, I like to consider insurance cost "per decade" or "per lifetime".
> No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically.
No, premiums don't need to cover payouts. You have to pay the premiums before you get any payouts, so the company invests them and makes money that way.
Off-topic, I find people have a similar misunderstanding of FAANG compensation. Functionally, the salary + RSU + bonus + refresh structure is equivalent to a larger salary (enough to cover fees for the following procedure) where you take out 4-yr loans every year to invest in the company stock. With that in mind, listing the realized stock growth when describing total compensation always felt a bit disingenuous.
100% is a bit uncommon. Take that at face value though. BigCo tech companies have much lower salaries than what you can get elsewhere. Compare a salary of X/yr plus a 4-yr RSU grant of X/yr to a salary of 3X. You absolutely can get a 50% partially secured loan for 4X to obtain similar payment characteristics to the BigCo offering (speaking in round numbers to keep the math simple, and ignoring fees, hedging, ... because they change exact thresholds and other minutiae rather than the core of the argument).
1. Know your insurance contract, know what's actually covered and what not (sometimes describing the same facts in two different yet truthful ways will result in your claim being accepted or denied) and have a non-shit insurance company (check reviews that talk about how they handle claims or ask friends that had claims).
2. "Self-insure" risks where the variance won't hurt you. In other words, if you can grudgingly eat the loss if it happened, don't get insurance and eat the loss if it happens. If you have a lot of disposable income, you don't need insurance for something that won't noticeably shift your budget. Likewise, pick high deductibles. What would you rather do: Eat a $300 loss, or have paid $200 in additional premiums and spend two hours of filling out their paperwork?
3a. An exception is if you just really want the peace of mind, are willing to pay for that, and think you can find an insurance company that will actually pay.
3b. Another exception is if you think they miscalculated the premiums. I know that this is unlikely, but it ties into the "peace of mind" criteria - if you think a risk is more likely than it actually is, just insuring it might be an easy way out. The premium might also be accurate for the average, but you might also think or know that you are at a significantly higher risk than average.
For the latter two points, I like to consider insurance cost "per decade" or "per lifetime".