🛡️ Insurance Basics · Lesson 6 of 8 · 7 min
Insurance You're Probably Overpaying For
🧾 The insurance industry makes a fortune selling protection against things that will almost never happen, to people too polite to say no at checkout. An extended warranty on an $80 blender isn't insurance — it's a tip you're leaving the manufacturer.
💡 Key idea
Skip insurance on anything you could just replace yourself — extended warranties, checkout add-ons, and duplicate coverage are usually a waste.
🧠 Why it matters
Not all insurance is worth buying. Common skip-it candidates: EXTENDED WARRANTIES on cheap gadgets (just self-insure — replace it if it breaks), credit-card payment 'protection,' rental-car insurance you may already get through your card, and the tiny add-ons sold at checkout. The principle from lesson one applies: only insure against losses you genuinely couldn't absorb yourself. Anything you could comfortably replace out of pocket is cheaper to self-insure — insurers profit precisely because most of these policies never pay out.
🌍 In the real world
💡 Buy the extended warranty on every $200 gadget for a decade and you'll likely spend more on warranties than the rare repair would have cost — that gap is the seller's profit. Self-insuring small stuff (just paying if it breaks) wins over time.
📌 Takeaways
- Extended warranties on cheap items are usually a waste
- Watch for duplicate coverage (e.g. rental-car via your card)
- Self-insure anything you could comfortably replace yourself
✅ Test yourself
Why are extended warranties on cheap gadgets usually a bad deal?
- They're illegal
- You could just replace the item — self-insuring is cheaper over time
- They're free
- They cover everything
Answer: B · You could just replace the item — self-insuring is cheaper over time
For low-cost items, paying for repair/replacement yourself beats years of warranty fees.
The guiding rule for what to insure is...
- Insure everything
- Only insure losses you couldn't absorb yourself
- Insure cheap items first
- Never insure anything
Answer: B · Only insure losses you couldn't absorb yourself
Reserve insurance for catastrophes; self-cover anything you could comfortably replace.
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