The loss from not having car insurance is not bearable for most people, and therefore is not a waste of money. First, your own car can be tens of thousands of dollars. Most people can't take that hit. Then, even if you drive a pile of junk, the car you hit may be worth tens of thousands of dollars. Finally, there's medical bills if you injure someone.
Oh, yeah, and then there's legal requirements that you have car insurance. So no, I don't buy the idea that car insurance is a waste of money.
I should've specified, I meant collision and comprehensive insurance. Liability insurance is legally required, as you said, and I personally take the maximum my insurer offers. Personal liability in an accident is potentially unbounded. This is an example of an unbearable loss that must be protected against, even if it costs money on average.
(If there's an outstanding loan on the car, the lender requires collision and comprehensive to cover their asset. Something to consider when financing a car - it's not just the car payment, but also the additional insurance you have to carry)
Used cars usually are not "tens of thousands of dollars". If one can't afford even a few thousand dollars in a pinch to buy a used car to replace one's current ride, then one probably needs collision and comprehensive too.
> Personal liability in an accident is potentially unbounded. This is an example of an unbearable loss that must be protected against, even if it costs money on average.
Why it is "unbearable loss"?
There is saying about that:
If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.
That may seems unethical, but if you think about it - it's reach people, who lives in our society, who needs to be careful to take care of their risks.
Of course, if you have assets to lose - you need to protect them (by buying insurance), but if you are "individual with limited resources" - it's not much different with / without insurance.
What I often hear is that poor people (with limited resources) needs to buy extra insurance to protect reach people from their risks. I disagree.
They were pointing out that liability in the case of a car crash could claim approximately all of your assets, where as a comprehensive loss can at most claim the current value of your car.
You have a good point though that if you have essentially no assets to go after liability insurance isn't worth much to you. This is why it is mandated for auto insurance (and why many places have underinsured motorist insurance, also)
If you're rich enough to not need collision & comprehensive insurance (i.e. you can put down a few thousand dollars to buy a car at short notice) you probably have assets worth protecting with liability insurance.
Oh, yeah, and then there's legal requirements that you have car insurance. So no, I don't buy the idea that car insurance is a waste of money.
Phone insurance? There I agree with you.