I feel it is ironic that two of the strongest urges in mankind are actually contradictory:
1.) The urge to avoid risk.
2.) The urge to get more than we pay for.
Perhaps as ironic, these two urges are often used to take advantage of people, giving them neither. A lottery may be an example. The amount wagered is small, thus seeming to avoid any real risk. Yet the lure is to get more than is paid for. Even though there is almost no chance to win, huge numbers of people give away millions of their hard earned dollars.
I think, another example is an extended warranty. The lure is the notion that by paying the fee, the risk of large repair bills can be avoided. The hope is to get more than is paid. In reality, the vast majority will pay far more than they ever collect. Obviously, if extended warranties were not so profitable, they would not be pushed so hard. Extended warranties are simply an over-priced, short-term, limited coverage insurance, in my opinion.
In most classic cons, the mark is set up to believe they are gaining the advantage, getting far more than they invest. When buying a car, the salesperson may begin with the question, would you like to buy a warranty to protect you? They may then render several examples of folks who have avoided huge expenses with the policy. Often other nearby salespeople will chime in, in agreement. The fact is, the salesperson and the dealership receive a large commission and this is merely part of the "sales job."
All sorts of tactics may be used, from fear, to making the client feel foolish for resisting such a generous offer. In reality the chances of getting more than you spend on the policy are very small. The cards are stacked in the favor of the warranty company.
For instance, the vehicle manufacturer’s warranty already covers most of the same items. An example would be a six-year/100,000 mile extended warranty. The vehicle may already have a three-years/50,000 mile warranty. In effect, you get only three-years/50,000 miles of coverage, because of this dual coverage. A well maintained vehicle is unlikely to have a major repair in this time period. If the vehicle is not maintained, the policy may not be honored.
A person might be far better to simply invest the cost of the policy. Properly maintain the vehicle and pay for any repairs from the investment. At the end of the term you are likely to have a good deal of money remaining. You have also avoided a great deal of hassle, trying to have your claims honored as well as the deductibles you would have paid each time a claim was made.
Above are listed two strong urges. The first is reasonable yet risk can easily be managed with common sense. The second is not reasonable and clearly defies common sense. Be very wary of any enterprise that promises more than you pay.
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I think, another example is an extended warranty. The lure is the notion that by paying the fee, the risk of large repair bills can be avoided. The hope is to get more than is paid. In reality, the vast majority will pay far more than they ever collect. Obviously, if extended warranties were not so profitable, they would not be pushed so hard. Extended warranties are simply an over-priced, short-term, limited coverage insurance, in my opinion.