The legal distinction between gambling and insurance [USA]
<p><a href="https://www.law.cornell.edu/uscode/text/31/5362" rel="nofollow">28 US Code §5362(1)(A)</a> defines a bet or wager to be:</p>

<blockquote>
  <p>the staking or risking by any person of something of value upon the
  outcome of a contest of others, a sporting event, or a game subject to
  chance, upon an agreement or understanding that the person or another
  person will receive something of value in the event of a certain
  outcome</p>
</blockquote>

<p>(1)(E) then explicitly states that this does not include, <em>inter alia</em>, "any contract for insurance".</p>

<p>My question is this: Ignoring (1)(E) and relying solely on the literal text of (1)(A), would insurance contracts have to be considered bets or wagers? </p>

<p>Gambling creates a risk where none exists. Gambling provides the opportunity for gains or losses. </p>

<p>Insurance mitigates an existing risk of loss. The buyer of insurance has no opportunity for gain. The opportunity is to be made whole. </p>

<p>EDIT: I suppose that I have provided the <em>practical</em> difference. The <em>legal</em> difference is that the statute distinguishes between the two.</p>

<p>I would say no.</p>

<p>The language requires a bet or wager to be based upon one of:</p>

<ol>
<li>a contest</li>
<li>a sporting event</li>
<li>a game</li>
</ol>

<p>Since insurance involves none of those things, I would say the answer is, "no."</p>

<p><em>I assume when you write "insurance" you mean the typical types of insurance like property, casualty, life, fire, etc.</em></p>

<p><em>In general</em> insurance is not gambling (according to that law).  However consider a golf club which has a tradition that if you hit a hole in one, you buy everyone in the club a bottle of champagne.  In that case, you might take out insurance against those costs, and <em>that</em> depends on "a sporting contest" (or possibly "a game").  As such, without the exception you quote, this insurance policy would be illegal gambling.</p>

<p>TL;DR: insurance isn’t gambling, but has sufficient similarities that it is better to be explicit.</p>
<p>Possibly under some circumstances.  Consider insurance for a race car, if the vehicle wins it probably won’t be totaled, conversely if it is totaled, it probably won’t win.  Lesser damage also decreases the chance of winning to some extent.  Could it be considered gambling to insure the vehicle when the payout will depend upon a skill utilized in a sport?</p>
<p>The spirit or intention of the law is clear, but courts rarely rule on what the law meant, but rather on what it actually says.  So, an explicit statement is added saying that regardless of any other factor, insurance isn’t to be considered gambling.</p>
<p>As for the difference between the two and why insurance is allowed while gambling isn’t.  It’s for the same reason that damages from lawsuits aren’t taxable —- it’s not considered a gain, but instead countering a loss.  Insurance isn’t a contest, where you risk your assets in order to get a reward. The insurer doesn’t get a reward if the event happens, and the insuree’s “gain” isn’t considered a gain, but rather a restoration to normal (or wholeness). Thus no one gains and there is no risk/reward taking place.</p>
<p>The insurance companies loss might be considered gambling, but they are expected to take that into account so that it is an expected expense and not a gamble.  Pure applied statistics with a margin sufficient to prevent their expenses from out running revenue.  States have laws requiring liquidity coverage ratio, in order to make sure that gamble isn’t too much for them to afford.</p>

united-states gambling insurance