Insurance is defined as “A financial risk management tool in which the insured transfers the risk of potential financial loss to the insurance company…in exchange for monetary compensation known as the premium.” Nobel Prize winner Daniel Kahneman sums up the purpose of insurance by stating that it can be thought of as “a choice between…
In my last post I mentioned that extended warranties are one of the worst types of insurance you can buy. The odds are heavily against the purchase of extended warranties working out in your favor. In spite of this many people swear by them and purchase them every time they are offered. Why is this?…
I recently wrote about “The Four Laws of Success and Probability.” The third law states, “If…the odds are not in your favor, avoid the game – if it is impossible to avoid the game, play with great caution.” Insurance is a game where the odds are never in your favor. The expected value of any…
