> You aren't allowed to set up a life insurance policy on someone else's life, or a fire insurance policy on someone else's home

This isn't really true. Lots of people take out life insurance on others as a hedge for many reasons, small business partner is one. Same fire insurance, we had a case where someone pledged a building as collateral and we took out separate fire insurance on the building so we'd get paid out immediately.

I'm not sure where this false premise started but alot of people believe it.

Polymarket is facilitating bets between people, not bets with the house. Gambling and insurance are both bets with the house.

You can sell your life insurance policy to somebody else. It's a way of getting money to sick people to use while thy are still alive.