I guess I should have specified financial benefit.
You wouldn't pay someone else to insure a common vegetable, because it is so low cost that if it turned out to be bad, you would just buy another one (or have bought extra as your insurance).
When you buy from Walmart/Target/Amazon/Best Buy, they will try to sell you insurance for a $30 toaster or other cheap appliance. Again, most people will not buy this because they will believe the appliance will work sufficiently long or that the warranty process will be too time consuming, or otherwise decide that just quickly replacing the cheap appliance with another is the preferred way to insure it.
The insurance seller is a business and has to earn more than what they pay out for claims (or at least to make payroll if it is a mutual insurance company). Otherwise, they are going to lose money over time and go out of business. If you financially benefit from it, then you are either lucky, or had an information edge over the insurance underwriter.
Of course, if you get peace of mind from buying insurance, and count that as a benefit, then most insurance is beneficial in that case.
That is really not how the insurance seller's business model works.
Think about it this way: on a given year, they are collecting "Sales" amount of money from their pool of customers. For the insurer to make a profit, the amount reimbursed to legit claims simply has to be less than Sales-Expenses that year, which basically translates to having Z customers claims on any given year where Z << NbOfCustomers.
So it's a bit like a Ponzi scheme, whereby you can benefit as a customer if you pay year 1 and get a claim during year 1 or 2 for example, and the insurer can benefit too if many customers pay "a year in advance" (money that can be invested) before having their claims fall on years 2 or 3 (or never).
The customers can earn investment returns just like the insurance seller, so you have to reduce foregone returns from the insurance buyer’s benefit so it ends up canceling out.
>For the insurer to make a profit, the amount reimbursed to legit claims simply has to be less than Sales-Expenses that year, which basically translates to having Z customers claims on any given year where Z << NbOfCustomers.
That inequality does not “basically translate”. Insurance sellers have to exist for multiple years, not just 1 year.
If every single year, “customer claims” are less than the net benefit of customers, which is what I think you wrote although it is hard to interpret, then your “net benefit of customers” includes a non cash component (such as feeling secure)”.
There is never a free lunch, and the insurance business is not at all like a Ponzi scheme (that’s the whole point of actuaries performing calculations…to ensure sustainability without an ever growing income stream).
You wouldn't pay someone else to insure a common vegetable, because it is so low cost that if it turned out to be bad, you would just buy another one (or have bought extra as your insurance).
When you buy from Walmart/Target/Amazon/Best Buy, they will try to sell you insurance for a $30 toaster or other cheap appliance. Again, most people will not buy this because they will believe the appliance will work sufficiently long or that the warranty process will be too time consuming, or otherwise decide that just quickly replacing the cheap appliance with another is the preferred way to insure it.
The insurance seller is a business and has to earn more than what they pay out for claims (or at least to make payroll if it is a mutual insurance company). Otherwise, they are going to lose money over time and go out of business. If you financially benefit from it, then you are either lucky, or had an information edge over the insurance underwriter.
Of course, if you get peace of mind from buying insurance, and count that as a benefit, then most insurance is beneficial in that case.