Decision Making and Buying Insurance

Did you know that if a person knew the date of their death, it drives up the possibility that they would buy life insurance by over 60%? If people knew there was a disaster coming of some sort, they all want to run out and buy insurance.  Why is that? Maybe not as simple as so they can cash in on the event.

Most individuals who don’t buy insurance or put it off, just do not believe an unfortunate event is going to happen to them. The problem with unfortunate events, we never know when they are going to occur. Most people are terrible planners when it comes to events which have a low probability of causing a loss. They just don’t think it will happen to them.

There have been studies that show insurance buyers will most likely look to insure against common perils or risks which usually cause small losses, instead of large catastrophic risks which have a very low chance of occurring. In essence, people buy based on the chance they can cash in on the insurance, rather than the principle of protecting against catastrophic loss.

If a consumer considers buying insurance, the same way they consider gambling, there is a good chance they will not purchase the insurance. These individuals are looking to invest a small amount of money with the hopes of a large payout.  We have all heard the buyer state “I paid in thousands of dollars over so many years and never collected a dime because I had no claims.” In retrospect that is a good thing, since you did not suffer the direct and indirect losses a claim can cause.

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