The math for any insurance pricing is basically Price = Expected Loss Severity x Expected Loss Frequency. The frequency of getting sued (Liability Coverage) is really low, hence low price, even though the expected loss is high. But yeah it really is mind boggling!

PS you've got me thinking about how I would explain insurance to a five year old! My son is 3 and Dan's is 4 so we'll get practicing.

It isn't that unusual. This is about what I'm paying USAA for similar coverage. The reality is my apartment will probably never burn down within my lifetime. In a decade, I will have paid $600. So they only need 167 out of 168 people to make it a decade without burning their apartment down to break even.

Biggest issues for insurance companies are bonding ($5 mill in FL for example) and payroll (as you scale out, you need more people to handle claims) in the home space.