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> You wouldn't buy insurance for the bag of rice you buy at a grocery store in case you drop it outdoors, the bag splits open and the rice is ruined. Why? Becau
by roganartu 8y ago
> You wouldn't buy insurance for the bag of rice you buy at a grocery store in case you drop it outdoors, the bag splits open and the rice is ruined. Why? Because you can easily afford buying another bag of rice.
> The same reasoning applies to a car. If you have sufficient savings, you can buy yourself a new car if and when you need to. Until then, just invest the savings and reap the investment rewards, exactly like the insurance company will be doing.
But it's not the same reasoning. I can afford to buy hundreds of bags of rice every month if I need to, without stretching my budget significantly. Rice for me is pocket change, so yes insurance would make no sense.
For the vast majority of people, a car is not pocket change. Sure high income people might be able to buy another and not go bankrupt, but there's a big difference between being able to afford something, and considering the expense pocket change.
- lotsofpulp 8y agoThe reasoning is: If you can't afford to replace it, then you purchase insurance for it. Replace "it" with whatever you want. Just because a car is not pocket change, doesn't mean you can't afford to easily replace it. And maybe if you feel that it will cause you stress or stretch you thin, then it doesn't fit the definition of "afford to replace it". Auto insurance company has way more data than you do on how likely it is that they will need to replace your car, so they will charge you appropriately, plus their salaries. So if you have a sufficient emergency fund, then you don't need the insurance, just like you don't need it for the bag of rice.