PepsiCo, Inc. (PEP), Berkshire Hathaway Inc. (BRK.A): Fantasy Football Insurance, Stupidest Money Move Ever?

Page 1 of 2

The primary purpose of buying insurance is to protect you against losses that could crush you financially. By that measure, the latest trend in insurance doesn’t make the grade — unless you’re betting a whole lot more on your NFL fantasy team than you should.

Fantasy football has become a big-money pastime, with an estimated 25 million fans participating. High-stakes leagues can have entry fees exceeding $1,000. But even in free leagues, the costs of player information guides, subscription-based scouting services, and other types of paid advice and tracking services add up. Players spent $1.67 billion last year on those services, according to information collected from Fox Business from the Fantasy Sports Trade Association.

With so much money at stake, insurance companies have jumped on the bandwagon, offering policies designed to pay out if certain players get injured. One company offers payouts of up to $1,000 if selected top-100 players miss more than eight or nine games of the regular season, depending on the structure of your fantasy league. What you’ll pay in premiums depends on how injury-prone a particular player is, ranging from 9% to 13% of the coverage amount.

Source: Gerald R. Ford Presidential Library and Museum, via Wikimedia Commons.

That’s a lot to pay for coverage that might not get the job done. With some key players, all it takes is missing a game or two to cost you a chance at league victory. But if your player doesn’t actually miss all those games — even if he doesn’t perform up to par — then that coverage won’t do diddly-squat to ease your financial pain.

Other stupid insurance moves

Fantasy football insurance isn’t the only silly insurance product ever conceived of. Plenty of silly types of coverage have been offered over the years — many from sellers that aren’t, in fact, insurance companies — and even gotten their fair share of buyers.

1). Scared that aliens will come to take you away? For more than 25 years, the St. Lawrence Agency has offered $10 million in UFO abduction insurance coverage for the lifetime price of $9.95. But don’t take it too seriously; company president Mike St. Lawrence says that any payout would be pay out at $1 per year for 10 million years.

2). Worried that a meteor will crush your home? You probably don’t need separate insurance, as your homeowners policy will typically cover falling objects like meteors or asteroids that directly hit your home. If a nearby hit causes shockwave-related damage, though, you could be out of luck.

3). Has watching too many episodes of The Walking Dead made you nervous about zombie attacks? ZAICO claims to offer insurance against losses from Class 3 zombie outbreaks, including the cost of replacing guns and ammunition, medical treatment, and incinerating dead zombies. At $14.95 per year, ZAICO thinks peace of mind is worth the cost.

Kidding aside, many legitimate companies have made questionable decisions about insurance. One of the best examples involves PepsiCo, Inc. (NYSE:PEP), which ran a promotion in 2003 offering a potential $1 billion payout to a contest winner. The odds of the billion-dollar payout were 1 in 1,000, but rather than taking on the potential liability risk itself, PepsiCo, Inc. (NYSE:PEP) turned to Warren Buffett and Berkshire Hathaway Inc. (NYSE:BRK.A), which was happy to accept payment of an undisclosed amount somewhere between $1 million and $10 million to take on the risk. In the end, no payout was made, and Berkshire Hathaway Inc. (NYSE:BRK.A) happily pocketed its premium.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!