Tuesday, May 1, 2012

Cracked on Insurance or Obamacare's like mandating BestBuy extended warranties

As part of their 5 Every Day Rip Offs that are Surprisingly Easy to Avoid.

Number 3 is Extended Warranties with this sage adivce: Don't Buy them

The insurance company figures this Uh-Oh has a 1 in 10 chance of happening each year, and if it does, it will cost $1,000 dollars. The insurance company will conclude that this insurance should cost them about $100 a year, and will then offer it to you for $150 a year with an enormous smile.

That's not completely unreasonable, incidentally. They obviously have to cover their overhead, the costs of maintaining all those nerds and spreadsheets, and they certainly have a right to make a profit. But you also have the right to not overpay for shit.

Now, in some cases, you should really still buy insurance. For things like home insurance, or life insurance, or car insurance, where you couldn't afford the costs of an Uh-Oh, then insurance is usually a prudent idea. It spreads out the costs of the Uh-Oh into small, bite-sized chunks. But if the Uh-Oh is less big -- more of a Meh-Oh, I guess -- where you can afford the costs, there's a concept called "self-insurance" you should know. This basically says, "Don't buy the damned insurance, Chester." The money you save by not buying it will more than offset the costs you'll incur. Losing a television would suck ...

As they point out there are some things you want insurance for but there's other things where it's not worth it. Basically if the bet is too small (Meh-Oh) or if its not a bet like say Gas-"Insurance". You know you're going to be buying gasoline.

The comparison to health care is obvious.

And before people scream "but Healthcare is different!" why yes it is, see the car/home/life matrix. In that case a catastrophic policy or major medical that covers something big would make sense.

And yes it's just a coincidence that Obamacare bans major medical policies. No, you have to buy a full comprehensive insurance no matter your needs. So yes, Obamacare is like forcing you to buy an extended warranty for every little electronic device.

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