Module: Basic statistics
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Do not believe in anything simply because you have heard it. Do not believe in anything simply because it is spoken and rumored by many. Do not believe in anything simply because it is found written in your religious books. Do not believe in anything merely on the authority of your teachers and elders.
- Buddha
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No, this reasoning is correct. Insurance companies employ experts in statistical reasoning (called actuaries) to ensure that the expected value of each kind of policy they sell is negative. It may be possible for certain exceptional individuals to have a positive expected monetary value for buying travel insurance; for example, if the person is very ill, there may be a high chance that they will need expensive medical treatment while they are away. Insurance companies attempt as far as possible to prevent such people from buying their policies. For the average traveller, however, the expected monetary value is certainly negative.
Go back and think about whether this means that it is irrational to buy insurance.