Contributed by LearnVest
Human psychology makes no sense sometimes. We buy high and sell low, act against our economic best interest, and insure things that we can afford to lose while we fail to insure the most important assets. Think about it: Are you more afraid of your computer crashing or of becoming disabled for the rest of your life?
Insurance Is All About Understanding Risks.
The key is to think out how much risk you can take on. If something goes wrong (like you wind up in the hospital) and the potential downside is $300,000, decide if buying insurance is worthwhile—you’d be spending a little money now to manage a big risk. Similarly, you could insure your computer, but if you have the money to replace it when it breaks or is stolen, then you might choose not to insure it, which is essentially self-insuring. Not getting insurance is still a choice; you’re making the choice that, if something bad happens, you’ll pay for it with your own money.
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