Warning: Plenty of economics lingo in this post.

It’s quite surprising to find that I haven’t really mentioned much about insurance since the birth of this blog. Afterall, besides having a strong interest in the subject (motivated by previous negative experiences), I was also an Economics major who even took a module on Health Economics. So short of claiming to be an expert in this area, I shall share my take on the concept of insurance.

First of all, I would like to highlight that the main purpose of purchasing insurances is to hedge/transfer our risk, and at a small cost. In this natural form, insurance is a beneficial tool for most people. This is because human beings suffer from risk-aversion and having insurance to protect them from catastrophic losses would increase the average utility of the person and population.

If you struggle to understand the previous sentence, let me illustrate with an example.

Imagine this place named Almost A Utopia. ...