Why You Should Buy Insurance You Hope Never to Use

Lucas and Luna explore the counterintuitive psychology of insurance: why we resist buying coverage for low-probability, high-impact events like disability or long-term care, even though these products offer the best expected value. They dig into a 2023 study from the Journal of Risk and Insurance showing that only 1 in 5 private-sector workers has disability insurance, and why behavioral economists call this 'probability neglect' — our brains systematically misprice tiny risks. Lucas walks through a concrete example: a 30-year-old earning $80,000 a year faces a 1-in-4 chance of becoming disabled before retirement, yet fewer than half of workers buy disability coverage. They also discuss why insurers use 'shock' pricing — low initial premiums that spike after a few years — and how that exploits our present bias. Luna shares a personal anecdote about choosing a high-deductible health plan and why she now thinks that was a mistake. The episode closes with a practical framework: treat insurance as a hedge against your own overconfidence, not as a financial product you expect to 'win' with. #Insurance #BehavioralEconomics #RiskManagement #DisabilityInsurance #ProbabilityNeglect #LongTermCare #PresentBias #FinancialPsychology #MoneyMindset #FexingoBusiness #BusinessPodcast #Finance #PersonalFinance #CognitiveBias #DecisionMaking #InsuranceDilemma #DavidRomer #JournalOfRiskAndInsurance Keep every episode free: buymeacoffee.com/fexingo