Can I Get Triple Insurance Coverage Please?

Fear of loss looms much larger than thought of gain.

In a study by Professor Daniel Putler, a former researcher for the Department of Agriculture, he made a very interesting discovery in an expansive study of all egg purchases in southern California. Economic theory says that price fluctuations should be received with equal intensity whether prices go up or down. What he discovered was something very different. When prices were reduced, consumers bought a little more than normal. When prices were increased, consumers completely overreacted and cut back their egg purchases by two and half times! You can probably validate that if you are the grocery shopper in your home. If prices go up, you decide to cut that product out when at all possible.

We experience pain associated with loss much more intensely than we do with the glee of experiencing a gain.

Taking these findings and relating it to things financial may provide a new lens in which to observe your behavior and how companies use this against you.

Take renting a car. At the last minute before signing the rental contract, they ask if you would like "loss damage waiver" insurance. The threatening phase conjures up all kinds of fear that most people pay for the expensive and redundant coverage.

If you haven't taken the time, do a little research and you will most likely discover that both your current auto policy and credit card will cover any "loss damage" issues that would arise. The offered policy is a easy way to generate huge revenue by playing on humans "loss" aversion.

There is a helpful article titled "Do you really need rental car insurance?" on USA Today.

Pay attention to how sly marketers are using this irrational fear against you to get you to quickly and consistently part with your hard earned cash.