True, each individual use of AAA membership does not recover the cost. But one lockout and one flat tire can make it worth while.
Yes, per year
. You would have to have those kind of emergencies once per year to make it worthwhile. I don't believe that's a normal frequency for the average motorist.
A refurb GPS costs about the same as three years of AAA, in which time you will have had to upgrade the mapping software for the cost of at least another year's membership.
Not necessarily. We haven't updated our GPS in 3 years and it still works fine. Realistically, how often do roads change?
Keeping a spare key in your purse is all well and good assuming you A) carry the same purse at all times and B) don't lock the purse in the car.
Admittedly, it's less convenient for women. I carry my wallet with me all the time, so a key in my wallet would be constantly accessible to me. I can see how it would be less of an assurance for women, though.
My house doesn't burn down regularly, but I still carry insurance.
I do too, but only because it's required by my mortgage company (they want to ensure that if it burns down, they still get paid). Once the house is paid off and insurance is no longer required, I will cancel it. Mathematically, it makes more sense to save the money yourself.
I also find it much more comforting to know that if I get a flat on a rainy night on the interstate, I can get help changing it, from someone with proper tools, and a truck with warning lights.
I can understand that. However, I very rarely find myself on interstates during rainy nights. Much more often, I'm on city streets during clear days. Thus, statistically, that is the time I'm more likely to experience a blown tire, if it's going to happen. It would be an extremely bad coincidence if my tire were to go flat on the rare occasions I find myself on an interstate, at night, in the rain. I'm willing to take that chance.
Do you carry any insurance? The entire model for that business is such that the premiums you pay will be less than the average total in claims.
Therefore by that logic, no insurance is worth it.
Mathematically it may make sense to forgo insurance for the greater expected value
of saving the money yourself, but alongside that you will have to accept the risk of ruin with not being covered.
Professional poker players deal with this problem daily, they may have an edge to play in a game they're not bankrolled for, therefore while their +EV would be high it also comes with a very high risk of ruin.
To provide a better example, in a poker game getting your money in with cards to come as a 70% favorite is a HUGE advantage. If you knew you could place a bet with these odds, how much money would you wager? Since you have a mathematical edge, the route with the most expected value would be to bet all of your worth. This will net the most amount of money when the simulation is ran to infinity. The problem is obvious in this case, as if you bet 100% of your worth you would have a 30% chance of losing everything, a devastating result.
If you could take the same bet an unlimited amount of times then yes, I would bet 100% of my worth in this situation. But instead I would diversity my risk by betting tiny increments of money on each individual case. This would net the exact same expected value but significantly lower the variance.
So once again the correct decision would come back to the amount of risk you're willing to assume, and whether or not you're "bankrolled" for the associated variance while lacking insurance.
To move back into a real life example, say you have a 1% chance of losing your house, but would still be responsible for the mortgage. Is that an acceptable risk? If you already answered the question then you're wrong. 1% chance over what period of time, and is it repeating? Would be the proper response. For most people, this situation would be absolutely devastating to their family. It would break them.
What happens now? The average family does not have the capacity to recover from such a loss without public assistance. In an ideal situation, this family would have a modest mortgage that consists of less than 25% of their take home pay (sound familiar?), and they would be able to shoulder two mortgages to term. Great!
But what about the families that fall victim to the 1% chance, twice. They're destroyed, should they be left to starve? No, the government picks up the tab because letting them suffer is not ethical.
The alternative is if the risk of losing their home is spread out evenly over everyone. Instead of 1 in 100 families being screwed, now all 100 families incur an insignificant 1% of the value of their home cost, and they no longer have to worry about this devastating scenario.
This is what insurance is all about, diversifying risk.
When in balance, I think it is a very good thing. Out of balance at one end of the spectrum is insurance companies making millions of dollar for profits, and at the other end is our government taxes not nearly covering the spending we do leading to our increasingly scary national debt.
Overall for a society I think insurance is a good thing. While I don't necessarily think our implementation is that great, the alternative world (one without insurance) is a much worse place to live in. Think of the increasing crime rates when desperate get screwed by their 1% chance.