Money WondersPlay

Risk, Insurance & ProbabilityInsurance

Insurance: Sharing Bad Luck

Many people pay a little so a few aren't ruined

One house fire costs about $88,000. What if a hundred neighbors each paid a slice before anyone knew whose house would burn?

You'll find out

  • What a street's bad luck costs each home
  • Why insurers want millions of customers
  • Franklin's fire company, still going

Why it matters

You pay for insurance every month. Seeing how the pool works shows what you're really buying.

About 3 min6 interactive slides · 5 questionsLesson 74 · Zone 9

Play this lesson

Free to play in your browser or on iPhone

More in this zone

  1. 73RiskRisk and Reward Travel TogetherHigher possible gains come with bigger possible losses
  2. 75ProbabilityWhy the House Always WinsRoulette's green zeros pay the casino
  3. 76ProbabilityExpected ValueWhat a bet is worth on average
  4. 77LotteriesThe Lottery Is Worth a ShotA Powerball ticket loses money on average
  5. 78Loss AversionLosses Hurt Twice as MuchLosing $100 stings more than winning $100 feels good
  6. 79InsurancePremiums and DeductiblesWhat you pay every month and what you pay when it happens
  7. 80Expected ValueIs the Warranty Worth It?Price the extended warranty with real odds
  8. 81UncertaintyThe Farmer's Lost HorseIn an old Chinese parable, each piece of bad luck turns out good, and each piece of good luck turns out bad