How does insurance work?

I have some idea how life insurance works – since you’re probably not going to die for a bunch of years,they can take the money you give them over time and invest it, and give you back more in the end, and still make a profit. I mean, I doubt they actually give you any more in the end, but the point is, the money comes from somewhere.

And I know that it’s not about money, but about economic security. For those who can’t afford to get car repairs, but can afford insurance, and need their cars to get to work, insurance is valuable, not in that it is a good investment, but in that it allows you to survive, even if you get into an accident.

But I get the feeling that once you reach a certain point of financial well-being, you can just save up a bit for a short while, and then have enough to buy a new car if you need it. And then, you don’t need insurance, because you can afford to insure yourself. At that point, since you aren’t paying for insurance, you are saving money overall, and you’re only better off in the long run.

On top of that, people often talk about how evil insurance companies are. If it’s that obvious… What is this power the insurance companies have over them? Just how bad a deal is it, really?

And why do employers offer healthcare plans? Those two things don’t seem like they should be related. At all. It seems like it would be much better for consumers if they could get higher salaries instead, and allowed to choose their own healtchare plans. Different people have different health care needs, and, as I suggested above, some people might not actually want them.

On top of everything, it looks to me like the entire system is overcomplicated, and the only side getting benefit from that is the insurance companies – through the complicated system, they can charge people way more than their service is worth, and not have anybody realize it.

Where’s the catch? Is all the value really hiding in the sense of security? Is insurance really worth it? Does bill gates have any kind of insurance at all? Or is insurance all just some sort of monstrous pyramid scheme?