Insurance isn't just a bill you pay every month — it's one of the oldest and most practical financial tools ever invented. As Karl Susman explained in Insurance Hour, the essence of insurance lies in its design: to spread risk so individuals and businesses can grow, invest, and live without fear of financial ruin from unpredictable loss.

The origins of insurance can be traced back to one simple idea — pooling resources. Imagine Abraham Lincoln's log cabin, worth $1,000. Lincoln, worried about losing his home to fire, agrees to pay $5 annually to an insurer. In return, the insurer promises to rebuild his home if it burns down. The math may sound impossible at first glance — how can $5 cover a $1,000 loss? The secret lies in scale and diversification.

Insurance companies don't rely on one person's premium. They collect small amounts from many people, creating a collective pool that can pay for large, individual losses. This shared-risk model has powered not only personal coverage but also the global economy, enabling business innovation, home ownership, and peace of mind.

Susman illustrates this elegantly — insurers don't insure every log cabin in one forest. If a single wildfire hits, they could lose everything. Instead, they diversify their policies geographically and by risk type. This reduces the chance that multiple losses will occur at once.

In modern terms, this diversification strategy applies to everything from auto insurance to cyber risk coverage. By spreading exposure, insurers protect themselves — and, by extension, policyholders — from catastrophic events that could otherwise bankrupt the system.

Insurance companies don't just stash your premium in a vault. They invest it — cautiously — to generate income. These investments are typically in safe, liquid assets like bonds, treasuries, or blue-chip stocks.

This investment income is vital. It allows insurers to keep premiums lower than they would otherwise need to be. When interest rates are high, investment returns help keep coverage affordable. But when rates are low, companies earn less on their reserves, and that loss of income often leads to higher premiums for consumers.

What's critical here is regulation. Every state in the U.S. has rules limiting where insurers can invest. They must ensure that funds are liquid and secure so that when claims arise, they can pay them — no matter what's happening in the financial markets.

One of the most fascinating topics Karl Susman covers is reinsurance — essentially, insurance for insurance companies.

Here's how it works: An insurer collects premiums from policyholders but doesn't want to carry all the risk alone. So, it "cedes" part of that risk (and part of the premium) to a reinsurer. If a massive loss occurs, both companies share the financial burden.

For example, if a company charges $5 in premium, it might keep $2.50 and pass the other $2.50 to a reinsurer. If a $1,000 loss occurs, each ...