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Insurance is not perfect

Now, INSURANCE IS NOT PERFECT!

Some of the drought years when you need insurance, it might not pay out, for example because it assumes different rainfall over they season from what you need.

Now we will travel back in time to the beginning of the year and start all over.

We assume the insurance usually covers the drought, but not always.

Again, you have a 1 in 5 chance of drought. We will draw from the 1 drought and 4 good year possibilities from the hat and then...

If it is a drought year, we will draw again from the hat. For the second draw there will be 2 blue packages of gum and 1 red one, representing a 2/3 or 66% reliability of the insurance.

The insurance is a financial service, not a gift so you only get as much money in the payment as you put in on average. That means if you get 5 coins as the insurance payout in the bad year, you will have to pay 1 coin each year, plus any finance fees.

You again have to make two choices, but this time, you should keep in mind that the insurance may let you down!

Make the choices! 1) Productive risk

  • Put your left thumb up if you take the chance

  • Put your left thumb down if you stay with your current, low productivity package

2) Insurance

  • Put your right thumb up if you buy insurance

  • Put your right thumb down if you do not buy insurance