Why couldn’t somebody just put money in a savings account monthly instead of paying insurance monthly?
In: Economics
You can in many cases, it’s called self insuring. You do it according to the level of risk that you’re willing to absorb. I can’t afford to pay out hundreds of thousands of dollars in the case of a car accident where I and my passengers get horribly maimed, so I carry car insurance to cover that. But that TV I just bought? I can afford to replace that if it breaks. So I don’t buy the protection plan for it.
That’s the same reason why term life insurance is a thing. I need life insurance while I’m young and don’t have a whole lot of assets to my name. But when I’m 65, only a couple years from retirement, and have a couple million dollars in my retirement savings? I don’t need life insurance anymore. If I die, my wife will do just fine with the money that we have.
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