Why do people pay for insurance? If they have the money to ensure protection in the case of damage or loss that isn’t guaranteed, why not save the money for when something actually happens?

Question

Why do people pay for insurance? If they have the money to ensure protection in the case of damage or loss that isn’t guaranteed, why not save the money for when something actually happens?

In: 0

Answer 1

Because it is for costs that are more than what you can afford.

Item: $5,000
Insurance: $20/mo

Let’s say you break it and need a new one. Assume no deductible or anything and the insurance pays the whole $5000. You would need to save 250 months to equal that $5000; so as long as it’s been under 20 years, the insurance is worth it.

Now, in the US it gets iffy with medical insurance, as prices are inflated as prices get haggled down and negotiated, but different insurances have different negotiated prices for different billed items (and if you don’t have insurance, you can tell the hospital and they may be able to drastically lower the bill).