Would you like to pay $20 for a protection plan on your new foot massager?
What makes me the most upset about these little games of chance companies want us to play, is how it takes advantage of certain demographics, like the elderly.
What makes me the most upset about these little games of chance companies want us to play, is how it takes advantage of certain demographics, like the elderly.
That offer really caught me off guard.
I was shocked by the 15% premium! I could self insure and break even if 1/6 products were defective.
Televisions will be around for years. The 3 toothbrush heads should last under a year. How are they going to break? I'm sure the manufacturer would give me a coupon for a free head if something was wrong, and it'd take about the same amount of time as finding the receipt, driving to, and doing a return at Walmart.
You should never insure anything you can afford to replace yourself.
But there are many people who don't understand the math or theory of insurance. And those people often have less overall education and earning potential. And those people are getting swindled hard.
I find that most people have such an emotional loss aversion, that there is no point to explaining the math or the simple concept of only insuring losses that you can’t afford.
You can even try to show them that if the grocery store offered insurance for a cucumber, would they buy it? And they will say no, and if you ask why, it’s because they can buy another cucumber for not much money.
But then they will turn around and buy insurance for a TV that costs a few hundred dollars, even though they can very well afford a new TV.
So I stopped seeing it as people getting swindled. What I see as having negative utility, they percent as positive utility due to the emotional comfort it provides.
This is true if you are an average person. If you know yourself to be a higher-risk, it could be a good deal.