Should you buy the add-on insurance for your iPhone that covers your loss in case you drop your phone and crush the glass?
Or should you get the one that covers your house, car or bicycle?
The insurance market can be a jungle to navigate sometimes, but I once learned a great lesson from a professor at finance school, that I have lived my life by ever since.
Only buy insurance that can save your life from ruin or total catastrophe
Would it be a total catastrophe if you had to pay for a new iPhone screen out of your own pocket, in case you dropped your phone? Probably not. Otherwise, you shouldn’t buy such an expensive phone.
What about if your house burned down? … That would ruin most people.
Make this distinction and you have a pretty simple and clear guideline for when you should buy insurance and when not to.
When you buy an insurance deal, it is essentially the same as placing a bet in a casino. The insurance company is the casino, and remember: “The house always wins”.
I know it would suck hard if your flatscreen TV fell off the wall and you had to go out and buy another one, but the odds of this happening is calculated into the insurance premium, and the odds are not in your favor.
Most people pay for many different insurance services that they never end up using because they have overestimated the likelihood of them getting triggered.
You don’t want to be that much of a sucker, do you?:)