No, in theory, they work like a well-funded savings account: you put in a predictable amount of money every month, and they store it for you until you need to withdraw it; with an added benefit that they would allow you to withdraw more than you have (internally using other people’s money to cover the difference) under the assumption that any shortfalls that result will all come out in the wash eventually; some people overpay, some people underpay, and you invest what you have in low-risk investments in the meantime. All insurance companies work like that in theory, or at least that’s what they tell regulators. But in reality, they don’t pay out nearly enough to provide the consistency people need.
That’s only in the case of some vertical integrators like CVS. Most just get between you and other products.
No, in theory, they work like a well-funded savings account: you put in a predictable amount of money every month, and they store it for you until you need to withdraw it; with an added benefit that they would allow you to withdraw more than you have (internally using other people’s money to cover the difference) under the assumption that any shortfalls that result will all come out in the wash eventually; some people overpay, some people underpay, and you invest what you have in low-risk investments in the meantime. All insurance companies work like that in theory, or at least that’s what they tell regulators. But in reality, they don’t pay out nearly enough to provide the consistency people need.