Insurance and gambling compared

Insurance and gambling seem to be same in some extent. Insurance is often erroneously confused with gambling. But actually there is great difference in nature and function between them. The basic difference among them can be summarized as given below:

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. For example, we bet $50 on football game, anew speculative risk is created.

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

3. Minimizing uncertainty and increasing uncertainty: insurance helps to minimize the uncertainty and risks in the society, hence it promotes industrialization and economic development. In contrast, gambling increases uncertainty, risks and conflict in the society. It does not promote industrialization. Rather than it increases people’s will to earn money by speculation or luck, not by honest activities of labor. Hence gambling increases bad people and social crime.

4. Restore: Generally, insurance contract restore the insured financially in completely of partially if a loss occurs. In contrast, consistent gambling transactions generally never restore the losers to their former financial position.

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