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.
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.