Introduction
Many amateur investors might feel that insurance is a typical form of gambling. This is because you make premium payouts throughout the cover of the policy and you receive your claim payouts only during an event of contingency.
Does this thought give room to another underlying thought that insurance might also be some kind of betting or gambling?
On this parlance, let us understand the key points of differences covering Insurance And Gamblingwhile also giving you a touchdown into the revolving specifics of both acronyms. Helping you get started here:
What is Insurance- Meaning and Conceptualization explained
Insurance is a calamity-protecting financial product that takes care of emergencies or unforeseen circumstances that people are usually less prepared for.
It can be the sudden death of the primary breadwinner in the family. Or, it can be a sudden fire accident that erupts at your factory outlet destroying or damaging the goods that are kept in godowns or storage outlets. Or, it can be a property theft that wipes out your entire home clean. Else, it can be a medical emergency for your loved one.
As these are circumstances or emergencies one can never contemplate or predict, an insurance cover is what you take to reduce the burden of losses you might otherwise face.
A life insurance cover insures the primary policyholder for an entire lifetime and during the event of death, the proceeds go in favor of the nominee who may require funds after the demise of the bread-earning member. It is usually the spouse that the policyholder usually attaches as a nominee.
Similarly, fire insurance covers damages occurring due to an outbreak of fire at your home or factory outlets. A comprehensive health coverage policy allows the primary policyholder or nominated members to avail cashless hospitalization from leading hospitals the insurance firms have tie-ups with.
For coverage of these circumstances, an insurance service provider agrees with a policyholder. The policyholder pays the insurance company. The payout is known as a premium subscription. The premiums are remitted by the policyholder to the insurance service provider. The premiums are remitted until you clear the entire policy amount you have taken coverage for.
And, once you arrive at a contingency for which you take insurance, you remit the bills or prepare an invoice for the money you are eligible for and you get your claim amount sanctioned. In a nutshell, this is exactly how insurance works.
What is gambling- Meaning and Conceptualization explained
Gambling is a type of betting wherein gambling enthusiasts bet upon money or valued items over a desired outcome or events that should happen in lieu of the same.
For instance, you have horse race gambling. The race participants bet upon a particular horse that should win the game. This is not based on merit but on an element of luck that favors the participant against the opponent.
Similarly, lottery or lotto games are events of gambling wherein certain code numbers that get displayed on the organizer’s dashboard tally with the lottery or lotto tickets you have on hand. Some winners win millions of dollars from lottery or lotto games.
Card games like Rummy, Poker, or Black Jack Roulette are played in countries like the UK, the US, and France and people win gizmo dollars or prize-winning emoluments for playing victorious in these games.
The commonly held similarity in each of these gambling games reveals that you might not be talented or be a hard-working individual to win these games. If luck plays its dice in your favor, you emerge victorious.
On the other hand, people also lose their money or hard-earned earnings over gambling games. Henceforth, winning magnanimously or losing heavily, are on the cards on an equal pedestal indeed.
Insurance And Gambling- Key Differences as Explained
These are the key points of differences covering Insurance And Gambling. Let us discover each one of them:
Defining purpose unveiled
Insurance is a type of calamity-protecting product wherein the primary policyholder approaches an insurance service provider to protect himself from calamities such as the sudden demise of a primary breadwinner in the family, property damage, or car accidents. You might also contemplate other unforeseen circumstances such as health or medical emergencies, burglary of jewels or expensive items inside the home, and so on.
Whereas, in the case of gambling, the purpose here is to win large sums of money from lottery games, betting events, and so on. The outcome of events or falling of dice in one’s favor purely depends on luck or these are games of chance and not based on one’s talent or hard work.
Getting into the seriousness of business
Insurance is a more serious business of risk mitigation. Here, the policyholder buys an insurance policy and pays premium subscriptions to insurance service providers. The amount is deposited by insurance companies into capital-protected shares, bonds, or commodities. When a claim amount is made for a contingency according to the norms as covered on the insurance policy, the claims get processed. A cheque or a demand draft is sent by the insurer in the name of the principal policyholder or the nominee designated to receive the claim money from the insurance company.
Whereas, in the case of the gambling industry, the purpose is purely of an entertainment nature. Here, the primary aim of gambling business units is to lure potential customers against winning lottery prizes or card games that come with huge prize winnings money. And people take to these gambling games to win huge payouts or ransom amounts in one single go.
Determining the level of risks involved
In the insurance industry, the premium amounts collected vis-a-vis the claim amounts sanctioned by insurance service providers is a spread over one. The premiums collected from subscribers form a pool and the reserves are created by insurers to process claim amounts of subscribers in the event of health hazards, accidents, property damages, loss of lives, etc. Therefore, the risk involved is minimal and if your policy covers your assurance amount, you are more likely to get the proceeds once you file claim amounts.
Whereas, with respect to the gambling industry, the outcome of events is highly unpredictable. For instance, the possibility of you winning a lotto game might be 1: 100,000. You may have more than a lakh of subscribers who have also opted to play the same game as you do.
Similarly, the odds or the probability of you winning a horse race may be 1:200 or more. Therefore, the event or outcome is highly unpredictable and highly risky in nature.
Expected Outcomes
With respect to Insurance, the expected outcome is the successful acceptance of the claim amount over the insurance coverage for which the insurance policy is taken for. In case of a rejected claim, the policyholder will have to reattach the correct set of documents that the policy document states with bills furnished accurately. Then, the chances of getting the claim sanctioned is higher on the cards.
Whereas, with respect to gambling, the expected outcomes can highly be dissuading and unpredictable. This is because the prize money is only meant for the first three winners whereas there are lakhs of subscribers who would have opted for the gambling games. Therefore, the outcome with respect to winning is very unpredictable indeed. Moreover, the expected turn of events or outcomes can highly be in favor of the aggregator or operator who is operating these kind of gambling games. Therefore, gambling can be a game of chance or luck wherein a lucky few win big while most of the others lose.
Regulations that are involved
Insurance is an industry that is highly regulated and governed by strict authorities that lay down norms as to how insurance policies must be curated. The claim amounts are also looked into by structured teams and amounts are made available to deserving policyholder’s bank accounts.
Otherwise, the rejected claims are kept track of and intimated to claim seekers. The insurance service providers are governed by the rules and regulations of investment houses, stock exchange offices, and the RBI. This way, a certain degree of fairness is maintained while maintaining claims and payouts.
Whereas, with respect to gambling, there are no proper regulatory authorities that oversee the contingent operations of how the prize contests are held vis-a-vis how members receive their prize earnings. Therefore, the subscribers lose money and these activities are to the risks of members who pay for lotto, lottery, rummy or other gambling games. The authorities may not own up to the money you lose here.
The Bottom Line
Gambling and Insurance depend on unforeseen events and the outcomes differ vividly in a case-to-case scenario. You must read offer documents or disclosures carefully before venturing into either insurance or going with something like a gambling event.
What are your thoughts on this? Do mention the same in the comments below!
Frequently Asked Questions or FAQs
Among Insurance and Gambling, which is the event that boosts the economy?
Answer: The risk mitigation the insurance industry provides helps individuals and business organizations from illnesses and loss of lives or properties. Therefore individuals and commercial enterprises can enjoy better peace of mind as they are covered against unexpected or unforeseen events that can add to a lot of collateral damage when left uninsured.
Does a gambling event improve the lifestyle of a person?
Answer: If the stakes are higher and the person wins a gambling event, then yes, it can improve the lifestyle of a person. Whether the returns are higher or not, you must manage your disposable income levels accordingly.
You must also keep track of the place or address of the venue wherein the gambling events are held. This is an essential tool that helps you sign up with authorities or enquire with them with respect to remittance of prize winnings, their tax implications and other vital details.
