How Does Home Fire Insurance Work? 
Home fire insurance works on the basis of shared risk . An insurance company brings together people with similar risks so that they can share losses if there are any . Since such a group would have houses of different values , locations , and exposures , the company uses statistics and experience to develop rates that would apportion the risk to the various houses . If in a particular pool the total exposure or risk is $ 1 billion dollars , your portion of the actual risk might be only $ 700 . 