Should you ever buy rental car insurance?, via MR
My own take:
Most insurance is overpriced. This is because most people are irrationally risk-averse. One the one hand, you could say that such risk-aversion is rational because of the diminishing marginal utility of money. But on the other hand, that's only when we're talking about large quantities, or losses that would affect your long-term plans. Back on the first hand, a small loss can in practice become bigger if it affects your fluidity, taking away your "working space" money, since making a loan isn't always so quick. In both large and small fluidity-taking losses, there are replanning costs that we shouldn't ignore.
The other defense is "rational irrationality": losing a $90 cell phone hurts me more than it should, and since I know this, I will buy insurance.
On this particular question, though, there is another twist. If you don't have insurance, the dealership could try to rip you off by making you pay for tiny scratches that were there already (it happened to me once, back when I was naive and trusting). In this case, you can be sure that either they won't fix the scratch or that they're friends with the mechanic who will charge $300 to paint over the almost-invisible mark.
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