Largely because of tax laws, insurance is pretty close to a scam. Insurance rates are based on the likelihood of event X. For example, if you own a $3M house in Florida that is susceptible to hurricanes (say a 1 in 10 chance each year of $100,000 in damages), you are going to pay $10,000 a year for hurricane insurance. So whether you have insurance at $10,000 a year or pay the $100,000 once every 10 years - you end up paying the same amount. The purpose of insurance isn't to pay you - it is only to provide some consistancy. (Much easier to plan many small payments than be hit with one very large payment) The scam part comes from the various tax laws. In the above scenario, the homeowner has to pay $100,000 over 10 years to insure his house against hurricanes. If the taxpayer has no insurance, he will have to pay for all $100,000 in repairs himself. But that is a casualty loss that is tax deductible! So after the tax deduction, it really only costs him around $60,000. Most multimillion dollar homes in hurricane alley do not have insurance. They are essentially self-insured by the various rich owners.