It gets this look because the insurance company is willing to bet that you and your property will not suffer the loss insured against. You, on the other hand, are “betting” you will suffer a loss.

In exchange for making this bet, and taking on the risk, they receive your premium. If they win the bet, they keep the premium. If they lose, they make the payout.

In this sense, they are often compared to a type of long term financial casino. However, this idea doesn’t take into account the replacement of the lost home, car, cash, jewelry or other property.

The difference between your premium amount, and the amount the insurance company will have to pay out if the loss occurs, is simply the odds, according to this line of thought, the insurance company is getting for taking on the bet. It gets compared to going to the horse races and betting on a horse that pays out 10 to 1.

This view of insurance has led to a number of people and religious communities disapproving of insurance because of its similarities to gambling. Among those groups that avoid insurance are the Amish and Muslim communities. What these people do instead is create a system of what is known as social insurance. What this means is that if there is a disaster and someone suffers a heavy loss, then the whole community will step forward and help them to deal with their loss and rebuild.

While this system is very simple, it has the potential to be just as effective a safety net as insurance. However, it requires that the community actually does step forward and help those who suffer from disasters. This means that it is more successful in small closed and closely knit communities than in large modern societies.

Social insurance systems therefore are not always effective. Often the community that is supposed to adopt it is not suitable for any number of reasons. Also, in very large disasters the system can break down as a small community will not be able to rebuild itself completely without outside assistance.

This is why larger modern insurance systems can be more robust. However, in extremely large disasters, like floods or earthquakes, modern insurance systems can also run into difficulties.

There are other ways in which insurance doesn’t follow the gambling model. For instance insurance companies seek to reduce the risk of the loss occurring constantly by requiring the installation of fire alarms or by reducing the loss if the insured against event does occur by providing rehabilitation to accident victims.