1. 10 Difference Between Insurance And Gambling Winnings
2. 10 Difference Between Insurance And Gambling Losses
3. 10 Difference Between Insurance And Gambling Companies
4. 10 Difference Between Insurance And Gambling Advice

Some people think that buying insurance is like gambling. They say that if we end up using it, we win and the insurance company loses. If we never end up using it, we lose and the insurance company wins.

Why Insurance is Not Gambling

General insurance includes Property Insurance, Liability Insurance, and Other Forms of Insurance. Fire and Marine Insurances are strictly called Property Insurance. Motor, Theft, Fidelity and Machine Insurances include the extent of liability insurance to a certain extent. Related: 4 Difference between Insurance and Assurance. BBC World Service journalist Tim Harford wisely states, “Legally and culturally, there is a clear distinction between gambling and insurance. Economically the difference is less visible.

However, buying insurance is actually very different from gambling. When we enter into a gambling engagement, such as buying a lottery ticket or putting money in a slot machine, we create risk of loss that did not previously exist. In other words, there was no risk of losing money to gambling until we bought the lottery ticket or put the money in the slot machine.

Conversely, the risk of financial loss from other causes already exists whether we purchase insurance or not. For example, my home faces the same risk of being burned down by a fire whether I buy homeowners insurance or not. If I do not have homeowners insurance, I am faced with the possibility of having to pay completely out of my pocket to rebuild my home in the event of a fire.

How Insurance is Better than Gambling

Even if we never end up using our insurance, we still benefit from it because it enables us to live a full, fun, free life that is unencumbered by constant fear of loss. If insurance did not exist, we may not feel comfortable buying or doing many of the things we now consider to be no big deal. When we are properly insured, we feel free to buy expensive homes, drive our own cars down the freeway, fly to Hawaii, cruise through the mountains on ATVs, ski down black diamond runs, and maybe even hike through the rainforests of South America.

How the San Francisco-Oakland Bay Bridge Illustrates the Benefit of Insurance

Have you ever driven across the majestic San Francisco-Oakland Bay Bridge that spans the San Francisco Bay in California? It is very impressive. According to the California Department of Transportation, it is 4.5 miles long (one of the longest spans in the world), 5 lanes wide, and stands about 200 feet above the water level of the bay. On average, 280,000 vehicles use the Bay Bridge per day. The speed limit for most of the bridge is 50 MPH, so thankfully it is equipped with hefty guardrails on each side.

For those of you who have driven across the Bay Bridge, have you ever hit one of the guardrails? I am sure that a very small percentage of the 280,000 vehicles that cross the bridge every day have ever hit the guardrails. However, if the guardrails were removed, how fast do you think people would drive across the bridge, even though they have never needed to use the guardrails in the past? 20 MPH? 10 MPH? Some of you may quip that you have never been able to drive more than 10 MPH over the bridge anyway because you are always crossing at rush hour, but you get my point.

Even if no one ever hits them, the presence of the guardrails still improves the lives of everyone who crosses the bridge because they can enjoy the drive without having to worry about falling into the water, and they can drive much faster than they would dare to drive otherwise. Would any of these passengers argue that building the guardrails was a waste of money?

Much like guardrails, insurance benefits our lives by increasing our efficiency and reducing our fear, even if we never end up using it. We must carry adequate insurance coverage in all of the essential areas if we are serious about maintaining financial security throughout our entire lives.

Are You Properly Insured?

At Capstone Capital, we help simplify your life by managing your financial assets so you can have peace of mind and focus on the most important things in life. If you have questions about your own insurance coverage, please contact us to schedule a free consultation.

Adam Dawson, CFP® is a Principal at Capstone Capital and the author of Timeless Principles of Financial Security.

Insurance and gambling were considered alike because there is an uncertainty of events and payment is made when the event occurs.

Like gambling, the insured is unaware of the time and amount of loss.

If the event occurs, the insured like the gambler gains; otherwise, they are experiencing the loss.

But there are certain differences between the insurance contract and gambling.

Nature of risk

In insurance, risks are existing, they may occur at any time.

For example, death, old age, fire, marine perils, accident, etc., may occur at any time.

Related: Risks and Insurance

If there is no insurance;

The person will suffer at the occurrence of these perils, but if insurance is taken against these risks, the ‘usurer will provide a fixed amount or indemnify the amount of loss occurred due to the insured perils.

Thus, insurance is protection against these risks.

Related: Types of Risks in Insurance

In the case of gambling, the risk does not exist, it is being created for a game or amusement white one will suffer and another will gain.

In absence of such game, nobody will suffer. In absent of insurance the property owner will suffer while due to insurance, no party will suffer.

Read more: Pure Risks

10 Difference Between Insurance And Gambling Winnings

Insurable Interest

In an insurance contract, insurable interest is essential.

Without an insurable interest, it would be wagering, contract. Thus, this principle clearly distinguishes the insurance contract from the gambling.

10 Difference Between Insurance And Gambling Losses

Insurance and Gambling Distinguished

10 Difference Between Insurance And Gambling Companies

• As an insurance student, it is necessary for us to be able to pinpoint the difference between insurance and wagering. There are:
• Insurance contracts are legally valid contracts, whereas, gaming and wagering contracts are void.
• Utmost good faith is required to be exercised in insurance contracts, whereas, it is not applicable to gaming or wagering.
• In insurance, the insured event may take place or may not, or may take place more than once (except life), but in gaming or wagering the event will definitely take place and it will take place only once.
• The principle of insurable interest applies to insurance contracts but not to wagering.
• Indemnity applies to insurance, but in case of gaming or wagering the person winning gets back his stake and also a windfall gain.
• In insurance, it is known as to which party is immune from loss, but in gaming or wagering it is not known which party is going to win or lose.
• An insurance event is never desired by either of the parties, but parties to gaming and wagering would always like to win at the cost of the other.

10 Difference Between Insurance And Gambling Advice

So it’s clear that insurance is not gambling.