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Insurance premiums and the lottery both have expected negative returns. I don't (generally) play the lottery, and I don't (generally) participate in involuntar
by rconti 6y ago
Insurance premiums and the lottery both have expected negative returns.
I don't (generally) play the lottery, and I don't (generally) participate in involuntary insurance schemes.
I don't buy pet insurance, I don't buy extended warranties; I generally try to avoid paying a third party's payroll, G&A, real estate, taxes, and profits, all on top of the actual expenses I incur that they (hopefully) pay for, after much paperwork.
That said, I sure don't carry the bare minimums in auto or health or homeowners insurance because I cannot afford a multi-hundred-thousand-dollar unexpected expense.
- orangecat 6y agoI cannot afford a multi-hundred-thousand-dollar unexpected expense. Right, which demonstrates that the expected value of insurance can be positive in terms of utility even if it's negative in dollars. For most individuals, a $100k loss is more than 100 times as bad as a $1020 premium. Meanwhile the insurance provider can absorb individual losses and still come out ahead overall.