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> And I should probably look into life insurance. Why? What exactly is it that you think "life insurance" does? If there were a product that would reduce the

> And I should probably look into life insurance. Why? What exactly is it that you think "life insurance" does? If there were a product that would reduce the variance in remaining life length, that might be interesting, but that's not what "life insurance" is. All it does is pay someone else some amount of money when you die, after you pay them some (usually increasing) amount each year while you're alive (with countless weird financial variants for those who really like being taken to the cleaners). The ev of every such policy is negative, as it is for all types of insurance. You are almost certainly better off taking the money you would have spent on premiums and investing it conservatively; that's all the insurer is going to do with it anyway, and that way you don't have to give them a cut or worry about them going out of business before you die. As always, the primary exception to this rule is adverse selection: if you know something about yourself that makes you much more likely to die soon, isn't reflected in actuarial tables, and won't be found by a medical exam (if required), then it may be to your designated beneficiary's advantage to buy insurance. But a healthy 34-year-old is so unlikely to die any time soon that they'll almost always be better off if you just stick money into some tax-deferred account and designate a beneficiary. Which is probably what you ought to be doing anyway, just in case you do happen to live a long time.

deleted 11y ago
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roryokane 11y ago
The EV of all insurance policy is negative when measured in absolute dollars. But the EV can be positive if the value of dollars to you doesn’t scale linearly. For example, if you have to spend $10,000 on medical bills, that might be 1 unit of disutility. But if you have to spend $100,000 on medical bills, that might be 30 units of disutility, not 10, because you just don’t have that kind of money and you will go bankrupt and your quality of life will go way down. With this reasoning, health insurance might have a positive EV for utility, even though it has a premium that gives you a negative EV for money. This reasoning is less likely to apply to life insurance, because people are less likely to care about what happens after they die. But for people whose beneficiaries would suffer a lot from losing their income – perhaps they would be evicted – life insurance can be worth it.

deleted 11y ago

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roryokane 11y ago

The EV of all insurance policy is negative when measured in absolute dollars. But the EV can be positive if the value of dollars to you doesn’t scale linearly. For example, if you have to spend $10,000 on medical bills, that might be 1 unit of disutility. But if you have to spend $100,000 on medical bills, that might be 30 units of disutility, not 10, because you just don’t have that kind of money and you will go bankrupt and your quality of life will go way down. With this reasoning, health insurance might have a positive EV for utility, even though it has a premium that gives you a negative EV for money. This reasoning is less likely to apply to life insurance, because people are less likely to care about what happens after they die. But for people whose beneficiaries would suffer a lot from losing their income – perhaps they would be evicted – life insurance can be worth it.