Wednesday, May 27, 2009

The Wisdom of Insurance

We're told repeatedly that its entirely irresponsible to not buy insurance. Well... one of the things we do... well... apart from the drinking and smoking... is challenge that which others take for granted. So lets get to it.

A commonly accepted rule of thumb is... the average person has a 1 in 16 chance of being in a car accident in any given year. Now... Obviously is far more complicated than that... but lets just take it at face value otherwise we end up lost in minutia.

So... how much does that accident cost you? It may cost you a few hundered dollars... or it may cost you hundereds of thousands depending on the injuries and lawyers involved... but the greater the cost of the wreck... the lower the odds of it happening.

We give insurance companies thousands of dollars each year... and we've done so our whole lives. How much have we actually gotten back though? I can only speak for myself... I've filed 1 claim in my whole life.


It was for a repair that cost roughly 5000 bucks. Not a very good return on my money.

Ya know what this is? Its bloody gambling. We're spending all this money... betting that we're going to hit the big one and need it. I want you to think about this...

We spend 300... 400... sometimes up to 2000 bucks a year on a insuring a single vehicle... and we actually have 3 or 4 of them. Over 20 years someone might pay as much as $40,000 bucks... and odds are he will only have been in 1 accident which may not even have resulted in a claim. Theft doesn't even factor in because the odds of having your car stolen is something like 1 in 150.

Fact is if you'd saved all that money you'd be able to afford to pay for any repair yourself... plus you'd be earning the interest off the investment... instead of giving it to a company to invest for itself.

Its a bloody scam.

When you play the lottery... you give someone money... betting effectively that you'll win and get some back.

When you buy insurance you're give a company money... betting effectively that you'll lose and have a car wreck... and be covered.

The money doesnt' work out though. If insurance wasn't more expensive than necessary by its very nature... the company's wouldn't make money. A responsible individual would be better off saving enough money to pay for an accident himself.

Ah.. but what about the big one? What about the every looming lawsuit?

May I suggest that without the lure of the deep pocketed insurance agencies the lawsuits would be far more rare? Don't get me wrong... they're already rare. The odds of you being in an accident and being sued for over 50 grand are extremely low. Not like winning the lotter low... but extremely low none the less... and if the blood sucking lawyers had no hope of pulling hundreds of thousands out of wealthy insurance companies they wouldn't be so trigger happy. I mean what are they going to get from little ol' you? The people suing you couldn't afford to pay them and they wouldn't get enough from you in the settlement to justify their time.

Ya know now that I think about it... I think I prefer casino gambling to our insurance system... after all... cops don't throw you in jail for not going to Vegas.

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