Does buying insurance makes sense for someone with very frugal money habits? I always feel like I’m losing out by buying car insurance. I am extremely frugal, only spend about 25% of my after-tax income, and rest are invested in low-risk bonds and index funds. I also maintain 2 years worth of living expenses in a savings account.
So my question is, what does an insurance buy me? I can afford to pay off in cash if something bad happens. Isn’t it a waste to pay insurance premiums?
In: Economics
Car insurance there’s generally laws about, because car accidents can cause much damage to OTHER people. And now there’s laws about health insurance, plus assistance available from the government, in the USA (“premium tax credit”) if you’re low-income… which is good, because “health insurance” SHOULD instead be “basic health care provided by government”, which went way astray in the US due to rampant capitalism.
But in general? Insurance is basically you betting that Something Bad WILL happen _before_ you’ve paid enough money to the insurance company to match what they would pay out when this happens. Life insurance, for instance, is you betting you’ll die before sinking too much money into the life insurance.
Whether this is worth it to you depends greatly on whether you’d need the money to repair, replace, or get over the Something Bad, and not be able to afford to right then.
–Dave, who is pretty sure the other comments won’t be taking exactly this tack
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