How Does Insurance Work_

FUTURE TECH - SHAHID

#insurance,#car #insurance,#life #insurance,#health #insurance,#home #insurance,#auto insurance,#insurance agent,#insurance sales,#whole life insurance,#how to sell insurance,#life insurance sales,#sell insurance,#insurance agent training,#insurance marketing,#insurance telesales,#insurance sales training,#insurance leads,#insurance career,#cheap car insurance,#life insurance agent,#homeowners insurance,#sell insurance from home,#final expense insurance

Transcript

00:00Insurance.

00:01Wow, that was probably one of my more exciting words to start this video with.

00:09So we're going to talk about insurance today.

00:11And I promise I'm going to do my best to make this really interesting, maybe.

00:16But if you want to learn how insurance works, stay tuned, because that's what we're talking

00:22about.

00:23But back to the video.

00:24Insurance.

00:26It's the annoying necessity that we all pay for to make sure we don't end up in massive

00:30amounts of debt if our house burns down, if we crash our car, or if something tragic happens.

00:37Insurance helps us maintain peace of mind, knowing that even if something bad does happen,

00:42someone else is going to pay for what it costs to fix it.

00:46Though to an untrained eye, this can be a little perplexing.

00:49I mean, if you pay $200 a month for home insurance, and after only six months, your home burns

00:55down, the insurance company will buy you a new house, likely in the matter of hundreds

01:00of thousands of dollars.

01:02But you would have only given them $1,200.

01:06Why would they do that?

01:07That's the power of insurance, baby.

01:13The basic concept of insurance is that a company, the insurer, offers a guarantee for a certain

01:19risk that may or may not occur.

01:21Then another party, the insured, pays the insurer in exchange for protection against

01:27that risk.

01:28When a bunch of people do the same thing for the same risk, eventually the insurer is getting

01:34a lot of income.

01:35But the probability of that risk happening is spread out among a bunch of people and

01:39stays about the same.

01:41Insurance companies make money by figuring out how much money they need to bring in to

01:45turn a profit on a given risk with a given probability.

01:49That calculation then influences how much each of the insured pays each month.

01:54In general, it's simple math, but in actuality, insurance companies have highly complex models

02:00for all of this.

02:05Not every insurance company offers the same insurance.

02:09Most insurance companies will specialize in their own kind of insurance.

02:13This is because each company has to develop a complex model to ensure that they can make

02:17money ensuring a profit.

02:20If you estimated that 1 in 100 houses burned down each year, but it was actually 5 in 100,

02:26then you'd be losing money pretty fast if you insured those houses.

02:31You'd probably charge too little for everyone's insurance and then end up on the hook for

02:35those 4 extra houses.

02:37There are many types of insurance companies, from auto to health to life to homeowners.

02:43Most people in the world have these core insurance policies, some of which are legally required

02:47to be held, like auto insurance.

02:50You might be wondering though, why wouldn't you just want to save your money each month,

02:54get to hold onto it in a bank account, then if nothing bad ever happens, you have a lot

02:59more money?

03:00Well, while that may be true, it makes you the one exposed to the risk.

03:05If you put away $200 a month for a year to save on home insurance, you'll have an extra

03:10$2,400 at the end of the year.

03:12However, if your house burns down the next year, well then you're going to be out the

03:17few hundred thousand dollars that it's going to take to fix it.

03:21A pretty bad deal.

03:23Is that a risk you're willing to take?

03:26Chances are, it isn't.

03:27That's why getting insurance is generally a good thing.

03:30It takes all of the risk and anxiety and financial burden off of you and puts it onto a much

03:36larger company that can afford it.

03:39When you understand insurance as just a way of paying a company to assume your risk, you

03:44can start understanding that insurance could, in theory, be offered on virtually anything.

03:52Are you worried that while you're toasting a cinnamon raisin bagel, your toaster will

03:56overheat one of the raisins, causing it to burst into a spontaneous plasma and destroy

04:01your entire pantry full of stockpiled bags of Lucky Charms and baked beans?

04:07Well, that's oddly specific.

04:09But someone could probably insure you for that exact thing.

04:13Likewise, maybe you're really attractive and worried that if you fall one time, you're

04:18going to hit your face, stop being attractive, and be depressed because no one will like

04:23you anymore.

04:24Well, somebody could probably insure you against that, too.

04:29This isn't too far off of reality, either.

04:31Celebrities will often have parts of their body insured because their image is a source

04:36of their income.

04:37There's a few more pieces to the puzzle here, though, and we should talk about reinsurance

04:42and insurance claims.

04:48When an insurance company wants to buy insurance on their own insurance policies, well then

04:53they buy something called re-insurance.

04:56That is not a joke.

04:58Say an insurance company realizes that they're overexposed to home fire insurance and a hot

05:03summer is coming up.

05:05Well they could take out re-insurance policies on their insurance policies to protect them

05:09from high losses in case all their houses they insure just burst into flames because

05:15global warming and whatnot.

05:17Then all the risk is on the re-insurance agency.

05:21This is a necessary thing, too.

05:23Think if an insurance company insured everyone in Florida's cars, but then a hurricane

05:28came through and destroyed all the cars.

05:30Well that insurance company may owe more in payouts than they have, and once they run

05:34out of money, well then no one would get money for their destroyed car like they thought

05:38they would.

05:39Re-insurance is necessary and important to ensure that insurance companies remain profitable

05:44and solvent to pay insured when there are claims.

05:52In terms of claims, insurance companies also don't just automatically pay out if you

05:57have car insurance and you show them a crashed car.

06:00The insurance company will investigate to make sure that you didn't intentionally

06:03crash your car to get the payout.

06:06If they find out that you did do that, well that's called fraud and you can go to jail.

06:11Faking insurance claims actually does happen quite frequently.

06:14People see it as a way to either get a big cash windfall if they're in hard times,

06:18or get out of a car or house payment that they can't afford.

06:21However, car insurance agencies employ top of the line investigators to make sure that

06:25they don't make faulty payouts.

06:28So now you can likely see insurance is a big business, and if you have the right models,

06:33assume the right kinds of risk, and have good investigators to make sure that you are

06:37not defrauded, well then you can make a lot of money.

06:41Conversely, if you buy insurance and something bad happens, it can save you a lot of money.

06:46In most cases, insurance is a winning formula for all parties involved.

06:50It helps consumers be less worried about bad events, and it makes companies a lot of money.

06:56And that's basically how insurance works.

06:59See, I told you it was going to be interesting.

07:02Maybe.

07:03Hopefully.

07:04Hopefully that was interesting.

07:05Otherwise, I don't know why you're still here.

07:07But we have more videos that you could probably click on right here that might be interesting.

07:13Or there's probably, if you're just tired of hearing my voice, you could click over

07:16to the right.

07:17There's probably other people's videos.

07:21But enjoy your day.

07:24Thanks for learning about insurance.

07:26We'll see you next time.

07:28Bye.

Category

Transcript

Recommended