A Lesson on Moral Hazard

Ritholtz:

But during some errands Sunday, we ended up near a Verizon store. We each got the iPhone 4, which I am happy to report actually allows you to make telephone calls. I took the bigger data plan, and the insurance, covering “lost, broken, stolen, cracked, wet” damage to the glass beauty.
Insurance is something I almost never buy, but the replacement price of the iPhone, combined with the number of cracked screens I have already seen made it imperative.
The missus found a case the exact same shade as her purple Moto-Razor. I didn’t see anything I liked, and knew I would find something fun online.  That is when one of the sales people told me I should really get a case “to protect the phone.”
I tossed the phone up and caught it, then (half-jokingly) said: “I don’t need a case, I have insurance.”
She was absolutely aghast.
I smiled and said to her: “Now you understand Moral hazard.”
I don’t think she got it . . .