10 Difference Between Insurance And Gambling

Motoring offenses: You cannot obtain an insurance policy against expected fines for offenses committed while on wheels. However, it should be noted that there is no clear distinction between insurable and non-insurable risks. Theoretically, an insurance company should be ready to insure anything if a sufficiently high premium would be paid. 1.Exacting risk and creation of risk: insurance is a technique for handling an already existing pure risk. For example, we pay $ 10 an insurer for auto insurance; the risk of vehicle accident is already present and is transferred to the insurer by a contract. No new risk is made by the transaction. But gambling creates a new speculative risk.

The concept requires that the insured have a 'stake' in the loss or damage to the life or property insured. What that 'stake' is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. The requirement of an insurable interest is what distinguishes insurance from gambling.
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Insurance and gambling seem to be same in some extent.Insurance is often erroneously confused with gambling. But actually there isgreat difference in nature and function between them. The basic differenceamong them can be summarized as given below:

1.Exacting risk and creation of risk: insurance isa technique for handling an already existing pure risk. For example, we pay $10 an insurer for auto insurance; the risk of vehicle accident is alreadypresent and is transferred to the insurer by a contract. No new risk is made bythe transaction. But gambling creates a new speculative risk. For example, webet $50 on football game, anew speculative risk is created.

2.Interest in the prevention of a loss: Insuranceand the insured both have a common neither the insurance not the insurer isplace in apposition where the gain of the winner comes at the expense of theloser. But gambling is socially unproductive, because the winner’s gain comesat the budgets of the loser.

10 Difference Between Insurance And Gambling

3.Minimizing uncertainty and increasinguncertainty: insurance helps to minimize the uncertainty and risks in thesociety, hence it promotes industrialization and economic development. Incontrast, gambling increases uncertainty, risks and conflict in the society. Itdoes not promote industrialization. Rather than it increases people’s will toearn money by speculation or luck, not by honest activities of labor. Hencegambling increases bad people and social crime.

4.Restore: Generally, insurance contract restore the insured financially incompletely of partially if a loss occurs. In contrast, consistent gamblingtransactions generally never restore the losers to their former financialposition.

5.Prevention of loss:Insurer and the insured bothhave a common interest in the prevention of a loss. Both parties win if theloss doses not occur. But in case of gambling one can win only if the secondparty loses financially.

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

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.

10 Difference Between Insurance And Gambling Winnings

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.

10 Difference Between Insurance And Gambling Losses

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