Tuesday archive: Risky business

From 5th May, 2006:

On a recent trip abroad, a reputable international car rental company tried to make me an offer I couldn’t refuse. For just 110 a day, I could protect myself from the frightening-sounding insurance deductible of 1900 – a sum I risked being charged if anything happened to the car. I bravely turned them down.

This was a strikingly overpriced offering. For each day’s rental I was being asked to pay 110 to protect me from the risk of paying 1900. The mathematics are hardly difficult: the insurance is fair only if I crash into something every 90 days. If I believed that, I wouldn’t get behind the wheel at all.

There is plenty of overpriced insurance around, always bundled with some other product. A popular mobile phone retailer will insure your £50 phone for 92 pence a week – nearly £50 a year. The fair price of the insurance is probably closer to £5 a year than £50.

Continued at timharford.com.

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