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Question about insurance and what it is!!! Please help me figure it out! Best answer gets bonus points!!!!?

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Please answer this question: Many of the first insurance companies were set up by and for people in a particular occupation. Sailors, lumberjacks and farmers are examples. Why would groups of workers like these have created insurance plans?

also, how is insurance JUSt another way to share risks?

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  1. They created them for their own protection, and the protection of their families, if they lost the ability to work or died and couldn't support the family.  Like a sailor could drown, a lumberjack could get killed on the job, a farmer could have a really bad year.


  2. It's kinda like betting. When the idea of insurance was first used, it was used by shipowners.  They calculated that- for example only 9 out of 10 ships would return from sea. But there was no way of figuring out which ship wouldn't come back. So they got together a pooled their money together.  This money they put together was only a small portion of what their ship was actually worth. When the ships came back, the shipowner whose ship didn't come back got the money. If they all came back, rates for the next one would go down.

    That is just a very simplified way of how insurance works.  We all get car insurance, but we pay only a portion of what our car is actually worth or the damage it could do. Therefore, we are all sharing this risk that some people will get into accidents and some won't. If there are more accidents than it was originally calculated, rates go up, if there is less, rates go down.

  3. The insurance company I work for was initially set up to insure farmers. They had to do this because the other insurance companies wouldn't write them because the lived outside of the city. This meant that there was practically a zero percent chance of saving the house or other property if it caught fire. NO one would've been able to get there in time to save anything. That's why they had to band together and create their own insurance company....hence "Farm Bureau".

    I can't speak for the other occupations you mentioned, but I'm sure it's becuase they also have a certain risk that's so specific to them, the average company wouldn't insure them.

    Insurance is another way to share risks because....many people put money into a pool, but only a certain few have to use it. Mathematically only a few of these people will experience a loss that would require money from the pool. So....people have decided that it's easier to pay a little money in every year to avoid having to replace their home, car, etc. on their own. Because your average person wouldn't be able to replace these items on a moments notice.

  4. According to the book, The Book of General Ignorance, lumberjacks, agricultural workers, and fishermen are in dangerous occupations.  On page 70 of this book, it lists dangerous occupations, and these are in the top ranking.

    So, maybe the earlier lumberjacks, farmers, and sailers were more at risk than other workers, and so required insurance.

    About the book I quoted:  It claims to lay to rest common misunderstandings and false beliefs.  It seems credible to me.  And, it's interesting to read besides.

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