How do we know, from the sensible gambling perspective, whether we are liking to gain or lose by paying insurance? The general concept is that we all pay a small amount all the time - so that when something goes unexpectedly wrong we can get it fixed. We are covering ourselves in case of extreme situations.
Now lets consider, insurance companies are not liking to run on a long term loss. Or they would be out of business shortly. So their fees are going to generally average out to keep them in business. So for all the car accidents, insurance fees payed by everyone will work out to pay for the repairs and also the companies employee wages. Now let's consider if we are less likely than the average person to have an accident. We don't drink, don't take drugs, don't speed and we are always reasonably situational aware while driving ... what happens if we insure ourselves? In theory it means we pay off insurance fees so that reckless drivers don't have to pay as much.
Lets look at third party car insurance. What happens if you crash into a sports car, and you very much cannot afford to replace it for them? Of course we must cover ourselves against this, just in case. Lets say our own car is a fancy new one, worth a lot of money? Why don't we insure it against any kind of damage just in case. Imagine if some company come out with a product to replace welfare / job seeking assistance. Everyone pays small fees toward their children's education insurance, and if they happen to struggle to get a job, then the agency will help them stay on their feet. If there were no government assistance on offer, and there is a reasonable chance of our children struggling after school, we better insure against it just in case. I have lost count the number of times my bank has offered to insure me against being unable to work ... while i was studying at university.
Where is the line? I see insurance as a small reduction in our average financial situation, but a reasonable improvement to the worst case. If we do this for everything in life, we are very likely to average out to be worse off than if we did no insurance of any kind. It comes down to whether we can take the risk. It's like a small lottery, only in reverse. The chances of it being worthwhile are very small, and chances are we are wasting money.
What about you? Are you the gambling sort? I'd like to think I gamble on things going right when logical, since as it turns out - thats where the good odds are.
