Insurance Agent: My dear sir, that is a fine house—pray let me insure it.
House Owner: With pleasure. Please make the annual premium so low that by the time when, according to the tables of your actuary, it will probably be destroyed by fire I will have paid you considerably less than the face of the policy.
Insurance Agent: O dear, no—we could not afford to do that. We must fix the premium so that you will have paid more.
House Owner: How, then, can I afford that?
Insurance Agent: Why, your house may burn down at any time. There was Smith's house, for example, which— House Owner: Spare me—there were Brown's house, on the contrary, and Jones's house, and Robinson's house, which—
Insurance Agent: Spare me!
House Owner: Let us understand each other. You want me to pay you money on the supposition that something will occur previously to the time set by yourself for its occurrence. In other words, you expect me to bet that my house will not last so long as it will probably last.
Insurance Agent: But if your house burns without insurance it will be a total loss.
House Owner: Beg your pardon— by your own actuary's tables I shall probably have saved, when it burns, all the premiums I would otherwise have paid to you—amounting to more than the face of the policy they would have bought. But suppose it to burn before the time upon which your figures are based. If I could afford that, how could you?
Insurance Agent: Oh, we would make ourselves even from our luckier ventures with other clients. Virtually, they pay your loss.