Something about the article felt off to me, and “should I buy insurance if interest rates are zero” is a good intuition pump for why.
Yes, I think you should still buy insurance. The reason I’d come up with, peace of mind aside, is losing a lot of money at once is worse than losing a little money over time, because when you lose a lot of money your options are more limited. You have less flexibility, less ability to capitalize on opportunities, less ability to withstand other catastrophes, etc.
I think any method that calculates the value/utility of your wealth as a timeless function of utility per amount will be pretty disconnected to how people behave in practice. It doesn’t account for people making plans and having to scrap them because an accident cost them their savings, for instance.
(But then again, I’m not an economist, maybe there are timeless frameworks that account for that.)
Something about the article felt off to me, and “should I buy insurance if interest rates are zero” is a good intuition pump for why.
Yes, I think you should still buy insurance. The reason I’d come up with, peace of mind aside, is losing a lot of money at once is worse than losing a little money over time, because when you lose a lot of money your options are more limited. You have less flexibility, less ability to capitalize on opportunities, less ability to withstand other catastrophes, etc.
Straight-up diminishing marginal utility of wealth, then?
Not necessarily.
I think any method that calculates the value/utility of your wealth as a timeless function of utility per amount will be pretty disconnected to how people behave in practice. It doesn’t account for people making plans and having to scrap them because an accident cost them their savings, for instance.
(But then again, I’m not an economist, maybe there are timeless frameworks that account for that.)