How do Insurance firms operate?

Question

Insurance being on any topic, ranging from Cars to Housing.

Answer 1

On your house.  They accept premiums based on the size of your "holdings"  (the house and possessions).   They have to receive more in premiums than they pay out every year.  So they have to base the premiums also on the "risk factors":  the location of the house,  the credit risk that the homeowner won't make the payment,  and the history of the house or owner in regards to previous claims.

If they take in $400 a year for 10 houses, then they need to pay out less than $4,000 that year in order for them to make a profit.  If they make a profit, they get to stay in business for another year.  If they lose money, they may have to close the insurance business.

Answer 2

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