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Why do people buy insurance even if they have the means to overcome the loss?
There are a couple of reasons that a person might choose to use insurance even if they could handle the financial loss if something went wrong. They know their risk better than the insurance company. While it might seem odd at first glance that an individual can be better at assessing risk than a large company with thousands of actuaries. There are limits to the amount of knowledge that an insurance company can have or use to price their insurance products. For instance if you were a very aggressive driver but didn't have any recent tickets or accidents because you were in college and didn't have a car on a regular basis, but now you have a job and drive 30 miles to work every day. You know your risk is relatively high but the insurance company sees you as relatively low risk and aren't able to price that extra risk into your premium. Just because a person can survive financial after losing something like a car or a house doesn't mean it isn't desirable to pay a small price to mitigate that risk. If you are using your savings to pay for an emergency then that money needs to be semi liquid in case you need it limiting your investment options. Where as if you purchase insurance you pay a small amount of money to be able to invest the rest of your money. Liquidity is a big deal particularly if you are a small business and investing into your business where your money can make your more money but you may or may not be able to access that money very easily.