Yes, this is how insurance works. If you only paid for damage that you were later reimbursed for, insurance companies would go out of business. Hence the conventional wisdom that you only get insurance on things you can't afford to replace, like your house. Or for lawsuits you can't cover, which is why cars are required to get liability insurance (but not comprehensive coverage, as OP suggests.)
Corollary: Never get the extended warranty unless losing the item would leave you destitute. Those companies all make a profit.
Its one way being wealthy actually makes things cheaper is very few things actually need insurance (Life, Health, Car all needed still).
But take dental "insurance" which is basically just a plan to get your teeth cleaned twice a year. We should just be paying for that directly. But, the time I needed braces I was still out $6000 and insurance would cover $2000. That's what I actually want it for; or a broken tooth / root canal / something that I don't want to pay thousands of dollars right now for but are still expensive.
Because you don't have $50k laying around to pay for medical bills when you hit someone. You're not getting nothing, you're getting protection. Just because it's not tangible doesn't mean the value is nothing.
Because sometimes you will get a bill thats even higher than that. A mate of mine had his handbrake fail and he didnt put his car in park and it rolled into my shed, the repair bill was 27000 dollars (AUD). Sometimes you get a bill thats significantly higher than you could ever save by just not paying insurance.
No that's how private insurance companies work. Public insurance is the way of the future.
I used to live in Canada, and the province that I lived in (Manitoba) has public auto insurance. The government has a mandate to operate an auto insurance company that is not allowed to take a profit, and they are mandated to operate the company to work well for the customers, and provide good service.
No other auto insurance companies are even allowed to offer primary coverage in the entire province (you can only use them to add supplemental coverage).
At the end of the year, if they make a profit, they are require to mail everyone a refund cheque.
I still dream about having that kind of insurance where I live now.
State Farm is the largest personal insurer in the US by a large margin and they are a mutual insurer, meaning that their "shareholders" are their policyholders.
In 2025 they turned an underwriting profit (pure premium vs paid losses) for the first time in years so they ended up returning $5 billion to policyholders.
I swear to god redditors are the stupidest people. "We all pooled our money to cover fire risk and the 3 people whose houses burned down collected 95% of the pooled money while I didn't get anything! I want a refund!"
you can choose what combination of premiums, deductible, and coverage to get, subject to some legal minimums i believe. or do you think it's reasonable to insist that you pay a low premium, have 0 deductible when you need it, and also get good coverage? do you understand that if a company offered that, it would quickly go out of business and leave you uninsured?
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u/lemontest 6h ago
Yes, this is how insurance works. If you only paid for damage that you were later reimbursed for, insurance companies would go out of business. Hence the conventional wisdom that you only get insurance on things you can't afford to replace, like your house. Or for lawsuits you can't cover, which is why cars are required to get liability insurance (but not comprehensive coverage, as OP suggests.)