Homogeneous group of people to spread the risk

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Reference no: EM131501349

Life insurance, like all other insurance, is the ability to combine a homogeneous group of people to spread the risk. Different insurance companies want to insure different groups of people, for example Progressive Insurance Company insures high-risk drivers for auto, Penn Treaty Network America insures high-risk individuals with medical ailments for long-term care, Foremost Insurance Company insures mobile homes, and Prudential provides group life insurance (sold to employers). Each company has their own unique rating factors and underwriting, and employs thousands of workers nationwide (and worldwide). Also, they collect millions of dollars in premium, which they turn around and purchase stocks and bonds on the global equities market, which in turn increases our own retirement portfolios. Trust me, if a company didn't invest their premiums to earn a higher rate, they would go out of business (especially home insurers). Before we get into understanding a deeper level of life and health insurance, please provide your initial (or underlying) opinion of life and health insurance. I want to clear out the misconceptions early.

Reference no: EM131501349

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