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TL;DR: If you want to know whether getting insurance is worth it, use the Kelly Insurance Calculator. If you want to know why or how, read on. Note to LW readers: this is almost the entire article, except some additional maths that I couldn't figure out how to get right in the LW editor, and margin notes. If you're very curious, read the original article! Misunderstandings about insurance People online sometimes ask if they should get some insurance, and then other people say incorrect things, like > This is a philosophical question; my spouse and I differ in views. or > Technically no insurance is ever worth its price, because if it was then no insurance companies would be able to exist in a market economy. or > Get insurance if you need it to sleep well at night. or > Instead of getting insurance, you should save up the premium you would have paid and get compounding market return on it. The money you end up with is on average going to be more than whatever you’ll end up claiming on the insurance. or > If you love your children, you should get disability insurance for them. or > You should insure only what you cannot afford to lose. These are the things I would say in response. * It is not a philosophical question, it is a mathematical one. * Technically, some insurance is worth its price, even when the insurance company makes a profit. * Whether or not to get insurance should have nothing to do with what makes one sleep – again, it is a mathematical decision with a correct answer. * Saving up the premium instead of getting insurance is making the mistake of conflating an ensemble average with a time average. * Love does not make insurance a mathematically appropriate decision. Running the numbers does. The last quote (“things you cannot afford to lose”) is the closest to being true, but it doesn’t define exactly what it means to afford to lose something, so it ends up recommending a decision based on vibes anyway, which is wrong. In order t