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To: Metacomet who wrote (90937)	9/30/2007 5:40:56 PM
From: neolib	Read Replies (2) \| Respond to of 306849

That comment would seem to indicate you don't know what insurance does. Insurance allows an individual to make a reasonable monthly payment for a statistically unlikely or rarely occurring event, which would break the monthly budget in a very significant way otherwise. If you think the above has no utility, by all means, go without insurance. Since insurance charges a fee for the above service, you can be more efficient skipping the payment of that fee, provided you have some other strategy for replacing the above function that is somehow more efficient. Please note that these rare events can be of two types: 1) One that occurs rarely, but is expected in your life, or 2) One which occurs only rarely amongst a group of individuals, i.e. you might well not get it yourself. Case 1) could be dealt with by any individual setting up a savings account and socking money away for this eventual happening. The only problem here is if the occurrence might come early in life rather than later. For example, with the prevalence of bypass surgery, it is odd that people don't start saving for it as an expected expense of later life. Insurance only makes sense for the unexpected, not the expected. So for case 1) the utility of insurance is a bit questionable, you aught to have the discipline to budget and save on your own. In that case you are simply self-insuring, providing the same actuarial function the insurance co does, and you pocket the profit as well. Case 2) is the valuable function of insurance averaging risks across a group. Think of rare cancers. Very expensive treatments such that you can't save for them, but you can pay for the group average risk along with the cost of the insurance service + profit. Another very good example is to look at pregnancy. Insurance coverage of the ordinary planned expense of pregnancy is not wise, that is an expected expense, so why pay a profit premium, there is no utility in the insurance function. Insurance coverage of complications during the pregnancy is valuable. This is coverage of the unlikely, with possible high exposure. When shopping for insurance, get a high deductible with high catastrophic coverage. Pay the low end out of your pocket. If someone tries to sell you a zero deductible policy with low effective total coverage, tell him he should be in jail. He is a scoundrel. Don't laugh and think this improbable. I once worked for a little startup which was purchased by another startup in trendy Palo Alto, and the insurance policy they all thought was so great was a zero deductible, with $25K total exposure limit. I sat in the room with a bunch of Ph'd who read the policy and thought it was great, and my comment, which was not well received, was that it was a piece of crap. However, they promptly changed policies. Please note that there is an additional advantage of insurance, which is behavior modification for routine checkups or preventive care. Some fraction of people are sufficiently irrational that they will not pay for periodic preventive care, which is at the low end and should be paid without the added cost of a profit penalty, but they will happily pay an insurance premium + profit penalty, then get the same treatment since it costs them "nothing". I have little sympathy for this mindset, but am well aware that it is a factor in favor of insurance covering some low end costs.