Psychic Hedging Insurance

I was thinking recently that I'd be pretty bummed out if I were blinded or paralyzed or suffered some other kind of life-changing injury. It then occurred to me that, while I probably could never truly be made whole, I might be a bit less bummed out if a very large sum of money were deposited into my bank account shortly after my injury.

I already have disability insurance, but this only pays 60% of my salary at the time of injury, which pays the bills but doesn't make me feel any better. And as a software engineer, I can take a lot of physical damage without really being disabled.

What I really want is psychic hedging insurance. I want to pay an insurer a monthly premium in exchange for a promise to pay me, say, $2 million in the event that I become legally blind, $3 million in the event of lower-body paralysis, $5 million for total-body paralysis, etc.

Does anyone know if such a product exists? Is it even feasible, or are there too many people who would happily poke their own eyes out for $2 million?

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Does anyone know if such a

Does anyone know if such a product exists? Is it even feasible, or are there too many people who would happily poke their own eyes out for $2 million?

I think that's the point, too many people would and that's why they tie it to your income.

maybe...

You might take a look at a Lloyd's policy. Lloyd's of London has insured in the past, such money-makers as "J-Lo's Body". I have no idea what sort of premium they'd command though, and I imagine that some of the more exotic policies they write (e.g., J-Lo) are more of a publicity stunt, than anything else.

David Z

"A free man must be able to endure it when his fellow men act and live otherwise than he considers proper. He must free himself from the habit, just as soon as something does not please him, of calling for the police." - Mises

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The key here is that enough

The key here is that enough is known about J-Lo to assume he will not voluntarily cripple his own body. The same is not true for any people entering an insurance shop.

Similar story, I believe Tiger Woods had a very big insurance contract covering his lasik operation.

Apparently not!

The key here is that enough is known about J-Lo to assume he will not voluntarily cripple his own body.

"He"? If so, then less is known about J-Lo than anyone suspected. Fooled me, that's for sure.

For Arthur...

you already have this

Depending on your age and salary, it's quite believable that your current disability insurance is more than this. 60% of your current salary for life will be more than $2M NPV, and blindness would likely count.

Ha! I wish the NPV of 60% of

Ha! I wish the NPV of 60% of my salary for the rest of my life were $2 million.

Allegedly, some desparately

Allegedly, some desparately poor people in places like India will sell an eye so that the cornea can be transplanted.

Not desperately poor, much

Not desperately poor, much poorer than the market value of a cornea. If the market for cornea was at $1,000,000,000 I'd sell one in an eye blink.

Sure, but losing one eye

Sure, but losing one eye isn't nearly half as bad as losing both. All losing one eye costs you is your depth perception, and even that's offset by the fact that you get to wear an eye patch, which makes you look dangerous and therefore gets you laid.

which makes you look

which makes you look dangerous and therefore gets you laid.

I was wondering why you started wearing one.

Two, actually. More is

Two, actually. More is better, right? And this makes me look really dangerous when I'm driving.

You can contract out self-inflicted injuries.

If you are found to have purposely burned down your own house, you don't get to collect on your home insurance.

If you did a thorough search, I bet you would find some sort of insurance product that provides a lump sum payment for disabilities. In fact, if you called a few insurance companies and asked for that, I bet you might get it. I think all too many companies would be all too happy to avoid the constant drain of paying 60% of one's salary and instead due a lump sum.

It's not a question of

It's not a question of lump-sum versus a lifetime annuity. I'm pretty sure it would be easy to find a third-party firm to convert from one to the other, even if the insurance company wasn't willing to do it directly.

What I want is not merely income replacement, but a sum of money above and beyond that to make me feel a little bit better about being blinded or paralyzed or whatever.

If you only want $1 million per eyeball,

If you only want $1 million per eyeball, you ought to be able to get that. I would guess the expected value of income replacement policies can be much more than that.

Moral Hazard

Psychic Hedging Insurance sounds like a moral hazard. I believe that in the past they found that people were self injuring in order to get the money. Value is subjective and some people under certain circumstances were valuing the money more than the body part. To make it non-subjective you need to tie it to some objective measure like income.

Some supermodel may insure her face for millions and then collect from a disfiguring scar. I on the other hand probably could afford the payments on such insurance for a few years, long enough so it's not obvious what I'm doing, then disfigure my face. I might be perfectly happy with a tough guy scar. What I don't see however is a compensatory drop in income. I get the millions, the cool scar and don't have to suffer a decreased income.

Insurance companies are just lining up the incentives correctly. Tying payouts to salary is a way to do that.

Health Insurance?

Does anyone know of health insurance companies that offer such straight-forward insurance? Can I buy a contract that pays out $X if I develop a malignancy, without constraints on how I spend the money?