Insurance is an contract of Indemnity. A person, who has insurable interest in his property, can insure his property. In the event of loss of such property, the insurer will indemnify the insured of the losses incurred on such property.

Wagering agreement are not a contract of indemnity. That means, the payment is not in regards to the loss incurred rather because of a pre-stipulated but uncertain 'condition''. (if it rains)

Wagering agreements do not have insurable interest. That means the persons wagering do not incur losses on the occurance of the 'condition' (say if A dies is the condition, the people wagering incur no losses whether or not A lives). But if I am insuring my car ( it is because I incur losses if the car is destroyed).

That is why Insurance is a perfectly valid contract, whereas wagering is illegal.