When you flip a coin, the probability that the coin will land on heads is 50% and the probability it will land on tails is 50%. However, let's say we flipped a coin 10 times, and it lands on heads 7 of those times. Does this mean the calculated probability was wrong?

No. In a small sample such as 10 coin tosses, the actual results may vary considerably from predicted results. However, if we flipped the coin 10 million times—a large number of times—the calculated probability of 50% heads and 50% tails would be extremely accurate.

Insurance companies cannot predict who will die when, but by using data about a large number of people, they can predict with reasonable accuracy how many people in a given population are likely to die during a certain period of time. And thus, the law of large numbers aids insurance companies in determining appropriate premium charges to ensure they can maintain financial strength while paying out claims.