[Nexus 6P General] cb474:
If you are spending every single disposable dollar you have, then you are budgeting your money badly. That's the problem there, not the lack of insurance. You should save some to cover minor losses (I define minor as losses that will not destroy your life, cause you to lose everything, and leave you in debt for decades--like huge liability claims). So this is just a mistake of managing one's finances (a common mistake), not a justification for buying overpriced insurance, like phone insurance.

It has nothing to do with financial goals. It is objectively a bad deal for anyone, just by looking at the relative cost of insurance per dollar, as I did in my first post. If everyone is selling gas for $3/gallon and one person is selling it for $10/gallon, then $10/gallon is a bad deal whether you are rich or poor. Similarly, if $1 buys you $9.44 of insurance per year for one type of insurance (Nexus Protect), but $1 buys you $833 of insurance per year for another type of insurance (a good auto liability policy), then the first insurance is a bad deal, objectively for everyone.

This is how insurance companies think about these plans for small losses, they know they're making a killing, that's why they love to upsell people on these plans (this also applies to extended warranties--a classic scam, in the same family as phone insurance). But most people fail to think about it objectively and instead get caught up in worrying about minor losses that would be annoying, but not destroy their lives. So they pay the exorbitantly high price per amount of coverage, because they think $89 on the face of it is not that much money. But on average, for the vast vast majority of people who buy these plans, they will over the long run pay far more for the plans than they will ever get back. And those who think they can predict whether they are more likely to need it are just overdetermining the risk and gambling on something they really can't predict.

Now a lot of people paying a lot of money for something that will probably never pay off makes sense when the risk (though a long shot) is a risk of a huge liability claim that would totally destroy your life. But when it's something that will probably never pay off for almost everyone and even if it does the pay off is very small, then you're just throwing away money.

The point of insurance, for sensible people, is to protect yourself from huge life destroying losses, not from small losses that you can deal with however much of a pain it is.

Okay, your math is terrible. First of all, you made up a $1 million number, when you said your coverage is $500,000 for liability; it makes no sense how you could get $1 million of coverage out of a $500,000 policy. But anyway, let's just go with the $1 million number, since that's what you used. My calculations above were for how much coverage you get for what you pay *per year*. So if you really could get $1 million for your $2256 (which by the way is way more than I pay, so you either have a bad policy or are in a very high risk group), then the cost is $1 for every $443 of coverage per year. If you want to calculate it over the entire 10 years, in your example, then you have to take into account you've had 10 years of $1 million coverage per year, so you've in effect gotten $10 million of $1 million/year coverage for your $22,560. Hence the number comes out the same, $1 for every $443 of coverage per year (which again is the unit, *per year*, that I used in my examples above). You can't just count up all the money you spend over ten years, but only count one year's worth of coverage as what you get for ten years of premium. That's just nonsense and bad math.

So you didn't pay $22,560 for the $1 million pay out you hypothetically get, you paid $22,560 for 10 years of $1 million coverage. Hence although in your example you had one accident with one pay out, you could have had ten accidents and gotten $10 million in pay out. In fact, with auto insurance the liability coverage is usually actually on a per accident basis, not a per year basis, so you really could have gotten even more than $10 million in pay outs over that 10 years making the insurance even a better deal. In other words, you don't pay for the pay out you happen to actually get, you pay for the maximum possible pay out you could get in the worst case scenario, which is a lot more than one accident in 10 years. (Though to be fair probably you would have been dropped by the insurance company and lost your license long before you got to $10 million worth of liability claims. But then you wouldn't be paying the premium anymore either. Riding the bus is cheap, from an insurance perspective.)

That aside, your point about the car insurance being expensive and probably not getting you much in the long run, is precisely my point. That's how insurance works. You pay for insurance that you probably will never need, in fact you pay a lot. Insurance of all kinds is almost always a losing proposition (from a monetary perspective). So it's only worth paying if on the small chance that you do need it, it will protect you from something that could totally destroy you financially for the rest of your life. That is a risk worth protecting oneself against, even though the odds are you will just pay money to an insurance company and never get it back. But for a relatively small risk like a phone, buying something that the odds are it will never pay off makes no sense, especially over a lifetime of paying for pointless policies for small things. The longer you play (as it were), the longer you're getting these little ripoff policies, the more and more the odds ensure that you lose and the insurance company wins (just like a casino--as I said above). If you only ever get a ripoff policy like phone insurance once and it happens to pay off, well then you just gambled and got lucky. But that doesn't make it a good decision. Decisions are only good (or bad) before you know the outcome, not afterward. You are far more likely to end up ahead, if you just save all the $89 amounts you might spend on small risks like this. And if you're unlucky and it doesn't work out, then you really haven't lost much, maybe a couple phones.

Lastly, $649 is not nothing to me. But anyone who can afford a $649 phone is not poor (is not scrapping by just to buy food) and can live with the loss if they have to (maybe they'll have to use their old phone or buy a cheap one that's not as nice as a Nexus 6P, horrors). And in fact if they just saved all the money they might spend on bad ideas like phone insurance, they'd probably have the money in the bank to cover themselves anyway, since the highest probability over the long haul is that they will not have made all the little claims they unreasonably feared they would have to make.

In fact, I'm just looking around and you can get a new Nexus 5 for $200 on eBay or a certified used one for $199 directly from T-Mobile. That's barely more than the $168 cost for Nexus Protect insurance plus deductible. You can get a used Nexus 5 for less than the $168 cost. So this is an excellent example of how you are far better off putting your $89 in a savings account. If you're unlucky, a Nexus 5 is not a bad fall back plan and is exactly as affordable as the insurance. Otherwise at the end of the day you've still got your $89 (to spend on your next phone or earn interest on or whatever). This also helps illustrate how if you can afford a $649 phone and you can afford $89 for insurance, then you also can easily deal with not having the over-priced insurance.

On the other hand, you could never save enough money to protect yourself for a $1 million dollar liablity claim or absorb the loss if you had to. There is no fall back plan for that. That's why that is the sort of loss you need insurance for, even if it's probably going to turn out to be a losing proposition for all but a few unlucky people.

That's how insurance works and that's the right way to look at the costs. For everyone.

So your logic and counterarguments really don't work. You're failing to look at the big statistical picture and overly focusing on relatively small risks that seem more present (than some life destroying car claim) but wouldn't be that big of a deal (relatively speaking). It is precisely this inability to see the forest for the trees that insurance companies prey on and use to manipulate people into buying bad products (like extra warranties, phone insurance, etc.) that serve no purpose but to make them a lot of money.