4 ms·

As far as I can tell, insurance only makes sense if the cost of the insured event would ruin you. Otherwise, you're better off just setting aside some cash int

As far as I can tell, insurance only makes sense if the cost of the insured event would ruin you. Otherwise, you're better off just setting aside some cash into a savings account and calling it your insurance fund. Insurers will always set premiums so that you're on the losing side of probability. Their real product is protecting you from the damage of going negative.

deleted 6y ago
[deleted]
ghaff 6y ago
"ruin you" may be a bit strong. Take travel insurance. Do I take travel insurance for routine trips that might involve me losing $200 for having to cancel a plane flight and maybe some hotels. Nope. But if I have a high 4 figures trip that I'll have to cancel if I sprain my ankle or because a family member who is having health problems needs me to stay home? Or because I know there could be expensive evacuation if something goes wrong. That seems a pretty good use of a few hundred dollars. Of course, in my case, this is pretty much the definition of adverse selection but maybe the relatively reasonable rates I can get are being subsidized by all the people who buy the insurance routinely.
- rocqua 6y ago
  So essentially, travel insurance doesn't protect "being ruined" it protects from making a shitty situation even shittier.
  - ghaff 6y ago
    I think that's true of a lot of insurance for people who aren't on the edge. Travel insurance basically covers two scenarios: - You've prepaid an expensive trip and can't go on it for some covered reason (injury, family situation) - Or you're on a trip and have to be expensively evacuated/repatriated (pulmonary edema in Nepal/break both your legs in Paris) For most of us who normally travel a lot, it's not about having to spend $1K out of pocket because luggage got lost/stolen or you had to do some complicated rebooking because of a delayed flight.
- chrisseaton 6y ago
  > Do I take travel insurance for routine trips that might involve me losing $200 for having to cancel a plane flight and maybe some hotels. Nope. The cost of the flight and hotels is irrelevant though. If you have a medical emergency while in a foreign country you could be looking at millions of dollars of costs to treat and repatriate you. That would bankrupt most people. Even if you're just popping to another city for a day - if it's in another country I think you really must be insured.
  - ghaff 6y ago
    I do have health insurance (which one might need to get money back from after the fact) which does cover when traveling and good luck getting just about any travel insurance policy to pay out "millions of dollars." Most of the time I'd be covered by my company anyway and I do buy travel insurance when doing activities with greater than normal risk. But I'd be surprised if anyone I know routinely bought travel insurance for foreign travel. I literally have never heard it come up in a conversation. This seems like a fairly balanced overview of the subject: https://www.ricksteves.com/travel-tips/trip-planning/travel-insurance https://www.ricksteves.com/travel-tips/trip-planning/travel-...
WrtCdEvrydy 6y ago
> Insurers will always set premiums so that you're on the losing side of probability. Their real product is protecting you from the damage of going negative. This is also a legal requirement as underselling the cost of the underlying risks can put your company at risk of insolvency. States hate having insurance companies go bust in case of a real emergency so there are liquidity, zip underwriting and other preventive measures to keep companies kicking because the alternative causes the state to eat the costs.
rocqua 6y ago
There are also cases where insurance works by aligning incentives, to help make early intervention easier. Take health insurance where you get free stop-smoking plans. It makes the barrier for signing up to such a plan much lower, which is good for you. It also makes the chance of people suffering from lung cancer lower, which is good for your insurer.

deleted 6y ago

[deleted]

ghaff 6y ago

"ruin you" may be a bit strong. Take travel insurance. Do I take travel insurance for routine trips that might involve me losing $200 for having to cancel a plane flight and maybe some hotels. Nope. But if I have a high 4 figures trip that I'll have to cancel if I sprain my ankle or because a family member who is having health problems needs me to stay home? Or because I know there could be expensive evacuation if something goes wrong. That seems a pretty good use of a few hundred dollars. Of course, in my case, this is pretty much the definition of adverse selection but maybe the relatively reasonable rates I can get are being subsidized by all the people who buy the insurance routinely.

rocqua 6y ago
So essentially, travel insurance doesn't protect "being ruined" it protects from making a shitty situation even shittier.
- ghaff 6y ago
  I think that's true of a lot of insurance for people who aren't on the edge. Travel insurance basically covers two scenarios: - You've prepaid an expensive trip and can't go on it for some covered reason (injury, family situation) - Or you're on a trip and have to be expensively evacuated/repatriated (pulmonary edema in Nepal/break both your legs in Paris) For most of us who normally travel a lot, it's not about having to spend $1K out of pocket because luggage got lost/stolen or you had to do some complicated rebooking because of a delayed flight.
chrisseaton 6y ago
> Do I take travel insurance for routine trips that might involve me losing $200 for having to cancel a plane flight and maybe some hotels. Nope. The cost of the flight and hotels is irrelevant though. If you have a medical emergency while in a foreign country you could be looking at millions of dollars of costs to treat and repatriate you. That would bankrupt most people. Even if you're just popping to another city for a day - if it's in another country I think you really must be insured.
- ghaff 6y ago
  I do have health insurance (which one might need to get money back from after the fact) which does cover when traveling and good luck getting just about any travel insurance policy to pay out "millions of dollars." Most of the time I'd be covered by my company anyway and I do buy travel insurance when doing activities with greater than normal risk. But I'd be surprised if anyone I know routinely bought travel insurance for foreign travel. I literally have never heard it come up in a conversation. This seems like a fairly balanced overview of the subject: https://www.ricksteves.com/travel-tips/trip-planning/travel-insurance https://www.ricksteves.com/travel-tips/trip-planning/travel-...

WrtCdEvrydy 6y ago

> Insurers will always set premiums so that you're on the losing side of probability. Their real product is protecting you from the damage of going negative. This is also a legal requirement as underselling the cost of the underlying risks can put your company at risk of insolvency. States hate having insurance companies go bust in case of a real emergency so there are liquidity, zip underwriting and other preventive measures to keep companies kicking because the alternative causes the state to eat the costs.

rocqua 6y ago

There are also cases where insurance works by aligning incentives, to help make early intervention easier. Take health insurance where you get free stop-smoking plans. It makes the barrier for signing up to such a plan much lower, which is good for you. It also makes the chance of people suffering from lung cancer lower, which is good for your insurer.