When purchasing insurance, the availability heuristic and the recency effect sway many companies and individuals. Insurance is generally purchased for two reasons � to make the person or entity whole again when they have been injured or their property has been damaged and to protect against events that are catastrophic in nature. Many individual insureds do not use a rational approach when deciding whether or not to purchase insurance such as general liability coverage, property coverage or automobile insurance. They tend to rely on the experiences of others in making this decision. Insureds will also tend to either overestimate or underestimate the amount of insurance they should purchase depending upon their own experiences and the availability of outside information. For example, insureds may rely on experiences from family and friends when deciding whether or not to purchase renters insurance. If friends or family of the insured have never been burglarized, the insured may be persuaded not to purchase insurance. However, if a friend or family member of the insured has been......

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