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The Rules of Wealth, 3rd Edition by Richard Templar

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RULE 23

Insurance pays someone, and odds are it’s not you

Just think this one through with me. Insurance companies set their premiums so that on balance (if not on every contract) they’ll make money. At whose expense? Yours of course. Suppose you pay £100 a year over 10 years, that’ll be £1000 in total. The insurer will have calculated that the odds are they’ll pay out less than £1000 in total for whatever-it-is you’re insuring. In which case it would have cost you less to pay the costs of repairs/ replacement/medical care or whatever, than it was to pay your insurance premiums.

It doesn’t matter what you’re insuring, or who with. This is just the way that insurance companies make their money. Plus they have admin costs, overheads, marketing ...

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