There are 1000 persons who are all aged 50 & are healthy. It is expected that, on an average. 1% of persons age 50 or 10 persons, may die within one year. if the economic value of the loss suffered by the family of each dieing person is take to be Rs.20000/- the total loss would work out to Rs.2,00,000/- If each person in the group contributed Rs.200/- the common fund would be Rs.2,00,000/- This would be enough to pay Rs20,000/- to the family of each of 10% who die. Thus, the risks are shared by 1000 persons, although 990 of them did not suffer any loss.
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