Insurance: Don’t Sweat the Small Stuff
authors: Richard Thaler and Cass R. Sunstein year: 2021 See in Zotero
Literature Notes
People don’t often think of the actual risks when buying insurance. This may lead them to overpay (or sometimes underpay) for risks that really aren’t probable or even have a big impact.
People should instead “self insure”. By taking a higher deductible (or not buying an extended warranty) and saving money, they should put that money into a bank account to use on the rare occasion that the insurance would be needed.
Many people when given a chance of many insurance policies end up choosing a policy that is ‘dominated’ by another. This means that a plan with a higher deductible, but lower monthly costs might be cheaper even with higher medical bills. The household would be more rational to choose the higher deductible and save the extra money per month. For example, if a deductible on one plan is 90 lower than the total plan cost 80 could be saved.