{"id":138,"date":"2020-10-12T06:32:04","date_gmt":"2020-10-12T06:32:04","guid":{"rendered":"https:\/\/marshallbrain.com\/wordpress\/?page_id=138"},"modified":"2020-10-12T18:10:44","modified_gmt":"2020-10-12T18:10:44","slug":"mars12","status":"publish","type":"page","link":"https:\/\/marshallbrain.com\/mars12","title":{"rendered":"Imagining Elon Musk’s Million-Person Mars Colony – Chapter 12"},"content":{"rendered":"\n

Imagining Elon Musk’s Million-Person Mars Colony – The greatest thought experiment of all time<\/strong><\/p>\n\n\n\n

by Marshall Brain<\/a><\/p>\n\n\n\n

Chapter 12<\/strong><\/h2>\n\n\n\n

How would insurance work on Mars? Yes, insurance…<\/strong><\/p>\n\n\n\n

Let’s try another example. How would insurance work in this new Mars economy?<\/p>\n\n\n\n

Insurance? Yes, insurance. Insurance is a purely financial product designed to reduce risk, and it is incredibly common in the developed world. Every middle class American pays for at least one form of insurance, and often is paying for three or four different kinds simultaneously (e.g. house insurance, health insurance, life insurance and car insurance). In some cases, it is possible to see the monthly bill for all forms of insurance exceeding the rent payment for a family of four in the United States (especially if there is a teenager in the family driving) \u2013 insurance is a huge deal, and a huge expense, for people living in developed nations on Earth today.<\/p>\n\n\n\n

Here is a nice definition of insurance to help understand what we are talking about:<\/p>\n\n\n\n

“Risk-transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party. Under an insurance contract, a party (the insurer) indemnifies the other party (the insured) against a specified amount of loss, occurring from specified eventualities within a specified period, provided a fee called premium is paid. In ‘general insurance’, compensation is normally proportionate to the loss incurred, whereas in ‘life insurance’ usually a fixed sum is paid. Some types of insurance (such as product liability insurance) are an essential component of risk management, and are mandatory in several countries. [ref<\/a>]<\/p><\/blockquote>\n\n\n\n

That’s a mouthful, but it gets very easy to understand if we look at an example.<\/p>\n\n\n\n

Fire Insurance<\/strong><\/p>\n\n\n\n

Imagine that you have a house. You are afraid that if the house burns down, you will have a big problem, as in no place to live. On Earth you are usually also concerned because you have a giant mortgage attached to the house, and therefore a huge problem with the mortgage company if the house burns down.<\/p>\n\n\n\n

So you buy fire insurance for the house. If the house burns down, the insurance company agrees to pay to rebuild the house. With fire insurance, you as the customer pay a monthly or yearly premium to the insurance company. Let’s say it is $600 a year, or $50 per month, for fire insurance on the house.<\/p>\n\n\n\n

Why is fire insurance so cheap? You are only paying $600 a year, but a house costs $300,000 say. Even if you paid the premium for 100 years, you have only paid $60,000 (ignoring inflation). The reason why this works out is because house fires are incredible rare, relatively speaking, in a developed country like the United States. Here are a few statistics:<\/p>\n\n\n\n