6.1.3 Attitudes toward insurance

Insurance is a way of reducing the risk of financial hardship if something unexpected happens. For most people, it makes sense to spend a little in order to be protected against large, maybe even crippling, expenses. But many people avoid buying insurance, even when they think it is a good idea.


Nick does not hesitate to buy collision and comprehensive insurance for his car, because he understands the financial hardship that would result if he injured someone in a crash. Yet Nick has not bought enough insurance to protect his wife and children if he were to die prematurely or become disabled.

Nick buys insurance against some risks but not others.

Why would Nick spend more on car insurance than for an adequate amount of life insurance?

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