Hacker News Reader

Comment by froindt | Hacker News Reader

It really feels predatory when they do it on consumables. I hope I'm never offered it again on a consumable.

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.

View on HN

You don't need to do any calculations to figure out if insurance on low value items is a bad deal for you. The insurance company has already done the sums. It is a bad deal for you.

You should never insure anything you can afford to replace yourself.

Only if all the other costs you incur while getting that thing replaced are smaller than you would by using said insurance to address it. Sometimes the cost you suffer when something breaks is not the same as the price of that thing.

Oh I know that. I've been reducing my insurance as my financial position has improved. I think almost nobody on this forum would buy insurance on low value items, as the math and straightforward probabilities explain themselves.

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.

Yes, I think that was my original point. If I get duped, then it doesn't hurt me that much. But there's a lot of people who are on fixed incomes, or just not that bright, and this hurts them.

> 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.

> The insurance company has already done the sums. It is a bad deal for you.

This is true if you are an average person. If you know yourself to be a higher-risk, it could be a good deal.

The cost of filing and fulfilling a claim is far higher than the value of the claim.

Reply on news.ycombinator.com