So we went to buy car insurance the other day. Julia was with us, so I discussed with her why we might choose one type of coverage over another. I asked her what the purpose of insurance was. She said something along the lines of, "To make it so you don't have to pay so much for stuff."
I said, "Yes. But if you buy a $100 microwave, you probably don't need insurance on it. You can probably take the risk that it will be fine and not break. If it does break, you'll deal with having to pay to replace it and will likely be able to do so. However, if you absolutely wouldn't be able to afford the replacement, it may make sense to get insurance on the microwave."
"In the case of this car insurance we could just get the liability coverage or the comprehensive coverage. If we were to wreck the car, we probably wouldn't have the money to buy a replacement. Which means that wrecking the car could cause us to have to go home early. Since the comprehensive insurance is only $200 more for the nine months, it is worth the additional cost."
I thought it was good to try and share that concept with Julia - make it a teachable moment - but I'm not sure how much she cared and how much set in.
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