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Insurance Doesn't Make Sense If You Have Savings

February 12th, 2011
money, insurance  [html]

Living in an apartment, it might make sense to get renter's insurance. We'd pay something monthly, and then if something bad happened the insurance company would pay for our stuff. The alternative is not to get insurance, and pay for stuff out of savings if needed. Insurance companies make money. They do this by charging people as a whole more in premiums than they get back in payments [1]. So as long as we can afford to re-purchase all our stuff out of savings, insurance has negative value to us.

[1] Health insurance is different because the company does collective bargaining to decrease how much the providers charge for their services.

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