Is insurance a 'sucker bet'?

So; we are always told to bet on a sure thing- to put your money on the best possibilities.

So what about insruance? Is that not making a payment with the desire it 'pays off' when it hits? Whats the chances of 'it' hitting.

Would insruance not be considered a sucker bet... whats the odds of getting in a car crash each month? 1 in 11,300 or so?

So your paying 100 bucks a month on a long shot incident.


Of course you can say well with insruance your paying a relative low amount to guard against the unlikely negative effects of something bad happening- and of course in gambling your buying extra to be rewarded big time in the case of an unlikely event. So does the fact your buying against a negative vs a positive suddenly make the investment worth while? Or is it still waisted money?

And I think some insruances are in fact "sucker bets" some of the more common incidences like health and vehicle might be swingable because its relatively common to use- but what about that extra 5-year warranty you paid for on your fridge?

Quote: Malaru

So; we are always told to bet on a sure thing- to put your money on the best possibilities.

So what about insruance? Is that not making a payment with the desire it 'pays off' when it hits? Whats the chances of 'it' hitting.

Would insruance not be considered a sucker bet... whats the odds of getting in a car crash each month? 1 in 11,300 or so?

And I think some insruances are in fact "sucker bets" some of the more common incidences like health and vehicle might be swingable because its relatively common to use- but what about that extra 5-year warranty you paid for on your fridge?

Auto insrance is optional but a good deal to some. You must buy the liability to drive but this insures the other guy, a point misused by the left during the Obamacare debate to justify the individual mandate. Collision and comprehensive are optional as long as your car is paid for. I am a safe driver and drive a cheapo car. New my total cost would have been about 5% of the car's value for all three or full coverage. I don't even know the split, but at half the total cost my portion was 2.5% of the car's value. Put in number terms, I could drive 30 years before the value of the car was paid in insurance assuming no claims.

But I have had claims over the years for stuff not my fault. So not a sucker bet to me, I get good value and will keep full coverage another years until I have more than enough saved to replace the car if it is destroyed. I run them until the wheels fall off and will continue to do so.

OTOH, health insurance is a sucker bet the way it is sold. People pay $800/month plus to get $10 office visits. Better to have a Health Savings Account and save the differnce. Then pay cash for what you like.

Homeowners only an idiot would not buy, best deal going.

Oh. I thought you were talking about BlackJack.


Yeah, I've often thought that most types of insurance is a bad bet.

They worst is Life Insurance. The only way to 'win' is to lose in the worst possible. Talk about hedging a bet!

In the UK, car insurance is NOT optional. So we are all suckers. Motoring in the UK is ridiculous.

First we have to have road tax, a fee paid to use the roads = £140 a year = $224 a year
Next is the yearly MOT to check the car is roadworthy = £40 a year = $64 a year
Then there is the insurance, some are as low as £400 a year average is £750 a year = $1200 a year
Then the fuel is £1.15 a litre or $1.84 or £5.28 a gallon or $8.36

If you get caught speeding your insurance will go up by about 50%
If you get caught using your mobile, it will double.

How does this compare to the US?

We do however have free medical for anything we want!

>In the UK, car insurance is NOT optional

In the US, your state will probably require you to carry Liability insurance.

There is a certain argument that you are a fool to pay insurance for something that would not be a financial burden should it come to pass.

Also, the insurance company will readily declare a 'total loss' on a vehicle. If your car is older, you may be paying insurance that doesn't reflect that well [IMO]. Thus at least drop Collision and Comprehensive coverage when you see you can cover the "total loss" of the car on your own, by checking its current value. In the meantime always max the deductible, as long as you can easily pay that.

Liability insurance is what almost everybody needs.

Quote: WizardofEngland

In the UK, car insurance is NOT optional. So we are all suckers. Motoring in the UK is ridiculous.

First we have to have road tax, a fee paid to use the roads = £140 a year = $224 a year
Next is the yearly MOT to check the car is roadworthy = £40 a year = $64 a year
Then there is the insurance, some are as low as £400 a year average is £750 a year = $1200 a year
Then the fuel is £1.15 a litre or $1.84 or £5.28 a gallon or $8.36

If you get caught speeding your insurance will go up by about 50%
If you get caught using your mobile, it will double.

How does this compare to the US?

We do however have free medical for anything we want!

I will assume the "road use fee" is the UK term for "registration" in the USA. Here your registration (ie: plates) will vary greatly. $36 here in Pennsylvania to in some states like Arizona where it is based on vehicle value where I paid $160 or so fo a subcompact to several hundred $$$ for a luxury ride like a Lexus. I have little time this morning so I cannot do the currency conversion,m sorry.

Many though not all states have a state inspection for safety and sometimes emmissions. I think I paid about what you paid last year.

My insurance is lower but I drive a cheapo subcompact and no violations. I think you might be marginally higher than a USA driver, but not by more than 5% or so. I will call it a tie.

Fuel here is about $3/gal right now. You guys are getting raped there paying so much for a country that at least exported oil into the 1980s. (do you still?)

Your insurance seems to go up a little more than ours for violations, here it is about 30-50%, depending.

A fascinating excerpt from a financial planning book about how MOST insurance is a sucker bet:

Your Money Milestones

Same as with any bet. If it wasn't a bad bet, the insurance companies would have no reason to sell it.

Thing is, life isn't always about the good bet and the bad bet, and risk has limits.

There is a school of thought that believes you should insure against the risks you can't afford to lose, regardless of the value of the bet. You keep insurance on the house because (for most of us) losing it would be catastrophic. You have life insurance so that if you die, your kids can go to college, or your wife can pay off the mortgage rather than support it on half the income. You carry liability insurance so that if you have an accident in which you hit a Rolls, you can pay for the damage you did. If your company's value is tied up in your ability to run it, then your company needs to have life insurance on you. During your peak earning years, you should have accident and health insurance (income replacement). Disability is the #1 cause of bankruptcy in the US, even with the current meltdown.

If you can afford to pay for a new house, maybe you don't need insurance. Once your kids are grown and the mortgage is paid, you may not need life insurance (the argument for term over whole, and a compelling one). If you're single and childless, and no one depends on you, life insurance is foolish. If you don't give a damn what happens to your family after you're gone, then spending money now to cover that possibility seems ridiculous. Everyone's needs are different.

And it also really is a personal choice. If you are dead set against life insurance, then don't get it. (Make sure your spouse is in agreement with this, of course; not carrying life insurance should be a family decision.)

My own personal belief is that there is not one path to financial security, but many. There are people who carry lots of insurance who end up secure; there are people who take all the money they would have spent on premiums and invest it who end up secure. Whatever you follow, think it through and use your head when making decisions.


[edit] The article referenced by dwheatley is excellent. Although I personally make different decisions on some things than the author does, I follow the same reasoning in making my decisions; after all, my needs, and my risk tolerance, are different from his. I'd rather pay $50 for trip cancellation insurance than carry an insurance reserve fund, for example. But that's why people are different.

I don't think we export any oil any more, we just steal it from the far east the context of something called "war on terror" and "weapons of mass destruction", although they never actually found anything. Although I guess oil could be considered a weapon of mass destruction?

Quote: Malaru

So what about insruance? Is that not making a payment with the desire it 'pays off' when it hits? Whats the chances of 'it' hitting. Would insurance not be considered a sucker bet... whats the odds of getting in a car crash each month? 1 in 11,300 or so?
So your paying 100 bucks a month on a long shot incident.

I thought you meant in BlackJack.
As with any Risk Management... we often know very little about risks and manage them poorly.

Life insurance? Many a man with young children has regretted the amount he spent insuring his life but failing to insure his wife's life where the insurance really matters. For decades the best deal was the Wisconsin Life Insurance available from the old days of the Populist movement. Many a pilot flew to Oshkosh for an air show and bought life insurance because it was such a bargain. Many life insurance policies are burdensome expenses and in old age people allow the policy to lapse. Some policies are marketed to Seniors on a guaranteed RATE but the fine print reveals that the coverage keeps escalating so the premium keeps growing even if the rate remains the same. Seniors buy a policy and soon find its too burdensome.

Disability insurance? Most people who become disabled do so as a result of a chronic debilitating illness that has been misdiagnosed over the years and has impaired earning capacity for years. If the policy pays off at all, it pays sixty percent of your most recent year's earnings. Often this is a pittance of what the insured's earnings were prior to five years of physical and mental decline.

Look at all the litigation over mold injuries? The insurance companies WANTED to have judgments against them so they could go running to regulators and seek relief. If you had a policy the carriers would often intentionally screw you just to run up their expenses. So much for your premium dollars!

Insurance Defense lawyers? They are the proctologists of the legal industry. I knew an Insurance lawyer who told me the insured had a "twelve to sixteen million dollar case"... which had just been settled for eighty-thousand dollars of "go get lost money". After the insured's lawyer took his cut, the Insured probably didn't wind up with enough to get drunk on! So much for having paid for an insurance policy.

Quote: WizardofEngland

I don't think we export any oil any more, we just steal it from the far east the context of something called "war on terror" and "weapons of mass destruction", although they never actually found anything. Although I guess oil could be considered a weapon of mass destruction?

Just wanted to nip this one in the bud--Iraq kept all its oil facilities, and the revenue from their production, even after we conquered the place. We didn't invade the place to loot its oil, as all the anti-America (in the U.S. and elsewhere) contingents keep saying. That idea is horseshit. If we had wanted to invade anyplace and grab its oil, we would have chosen Saudi Arabia, not a place (Iraq) that only has 30 years' worth of oil reserves remaining. And we had at least as good a pretext after 9/11 to invade Saudi Arabia as we did Iraq. (Ignoring the question of whether we would do something that immoral--after all, we ARE The Great Satan.)

And as I keep trying to point out, when you announce to the world for MONTHS that you're coming to get somebody's something--whether it's Saddam's chemical weapons or the pot stash your son keeps in his sock drawer, when you finally get around to coming after it, and it's not there any longer, that does not support the conclusion that the thing you're looking for never existed.

We now return you to your regularly scheduled program.

To get this thread back on track after the FORUM THREAD HIJACKER put in his confused two cents again....I'm not a big believer in insurance and do think it's more of a sucker bet than anything else. I have 3 above avg. cars, I pay thousands in insurance every year and have never used it other than for glass repair or replacement. Both my and my wife's companies offer the typical health insurance but we decline coverage every year and self-insure. It's saved us a ton over the years. The trick is to live a healthy lifestyle, led by eating less and moving more. This $30billion dieting industry is for the birds. Life insurance is cheap and only worth it if you have a home and children in college. After that it's a waste of money and the price skyrockets as you get wrinkles. Maybe mkl can offer some insight on that.

JL- unless you are EXTREMELY wealthy self insuring for medical is quite risky. A common diagnosis, say, prostate cancer requiring surgery, could cost upwards of 50, 000. There are other diagnoses that require treatments that cost in the hundreds of thousands of dollars. If you are indigent you will just get free care, but if you have assets they are at risk. I will bet you that Rob Singer has health insurance.

Quote: SOOPOO

JL- unless you are EXTREMELY wealthy self insuring for medical is quite risky. A common diagnosis, say, prostate cancer requiring surgery, could cost upwards of 50, 000. There are other diagnoses that require treatments that cost in the hundreds of thousands of dollars. If you are indigent you will just get free care, but if you have assets they are at risk. I will bet you that Rob Singer has health insurance.

I know all that, it's a risk worth taking to me. For now anyway. We've had no medical problems and we don't even wear glasses yet. We will have them down the line and we're deciding on when to get it. It's a gamble and I've won....so far. BTW we're not extremely wealthy, but we could withstand a surprise $50k medical bill. It's all part of the gamble because I believe some insurances are a sucker bet.

Rob Singer is over 60 and he's an old man compared to me, so I won't take that bet.

Quote: JerryLogan

... and we don't even wear glasses yet. ...

Jerry, this post is completely off-topic, and I assure you it is not an attack on you at all. I just thought I would mention what came to mind when I read your post. There is the old story about the boy who was engaging in a very private activity that folk lore claimed could cause him to go blind. His reaction was, "Can I just keep doing it until I need glasses?"

And now back to your regularly scheduled program.

Quote: Doc

Jerry, this post is completely off-topic, and I assure you it is not an attack on you at all. I just thought I would mention what came to mind when I read your post. There is the old story about the boy who was engaging in a very private activity that folk lore claimed could cause him to go blind. His reaction was, "Can I just keep doing it until I need glasses?"

And now back to your regularly scheduled program.

Do you know how JEALOUS mkl will be of you when he sees that?

Quote: JerryLogan

I know all that, it's a risk worth taking to me. For now anyway. We've had no medical problems and we don't even wear glasses yet. We will have them down the line and we're deciding on when to get it. It's a gamble and I've won....so far. BTW we're not extremely wealthy, but we could withstand a surprise $50k medical bill. It's all part of the gamble because I believe some insurances are a sucker bet.

Rob Singer is over 60 and he's an old man compared to me, so I won't take that bet.

Pick up catastrophic health insurance (with a deductible $10,000 to $20,000) which isn't expensive at all. And get a health saving account so that little expenses and big ones are all pre-tax. And it grows if you don't use it right away (one day, you will). Live a healthy lifestyle. Still do screening tests though, that are proven (colonoscopy, PSA, check BP and cholesterol and CBC yearly, etc.). That is perfect for folks like you. I agree, don't buy traditional insurance in your situation.

Obama doesn't like folks like you who are too healthy, and wants to force you to pay money into the system to subsidize all of us who are fat, diabetic, lazy, have bad genes, and who are hypochondriacs. But in the short run, Obama gave you a gift in that there will be no penalty for pre-existing conditions which was the big risk for folks like you who want to go buy insurance later (and can't) when you actually do need it and it no longer is a sucker bet.

You are on the right track. If everyone was like you, health care expenses would be 10% of what they are now.

I wasn't aware of the opportunity to buy catastrophic health insurance with a big deductible--thanks! I will look into it and do it if it fits.

I'm a big believer in the "Move more/Eat less" doctrine. I walk everywhere within a couple miles. My neighbor who is one big fatass, drives to the community mail boxes every day and it's a 3 minute walk. His wife has the face of Miss Piggy and the body to match, and their two teenage sons who'd rather watch Paula Dean cook with piles of butter than pull weeds, couldn't walk down the street without being winded.