Journal of Finance and Economics Volume 4, No. 4 (2016), 1-10 ISSN 2291-4951 E-ISSN 2291-496X Published by Science and Education Centre of North America ~ 1 ~ Individual Risk Preferences and Better Car Replacement Fan Liu 1* 1 Department of Finance and Supply Chain Managment, John L. Grove College of Business, Shippensburg University, Pennsylvania, USA *Correspondence: Fan Liu, Associate Professor of Finance, John L. Grove College of Business, Shippensburg University, Pennsylvania 17257, USA. Tel: 717-477-1786; E-mail: fliu@ship.edu Received: June 02, 2016 Accepted: September 14, 2016 Online Published: October 12, 2016 DOI: 10.12735/jfe.v4n4p01 URL: http://dx.doi.org/10.12735/jfe.v4n4p01 Copyright © Fan Liu ** Abstract We conduct a survey to examine the impact of individual risk preferences on better car replacement decision in the insurance market. The survey consists of a lottery choice task and an insurance questionnaire. Our results strongly support contentions that consumers are significantly influenced by their risk attitudes and the insurance premium. Further, we find that female consumers are more influenced by their degree of risk aversion than male consumers when making such insurance decision. Moreover, our results show that when the level of risk aversion is controlled, the individual risk preferences have different magnitudes of impact on insurance decision making. JEL Classifications: C91, G22 Keywords: better car replacement, individual risk preferences, insurance premium, purchasing decision, risk aversion, risk attitudes 1. Introduction Most insurance companies nowadays are pretty good at providing coverages on automobiles. In a push to attract more customers, one auto insurer, Liberty Mutual, is currently offering “Better Car Replacement TM ” to raise car replacement a notch. This coverage is expected to exceed the standard ** This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/). Licensee: Science and Education Centre of North America How to cite this paper: Liu, F. (2016). Individual risk preferences and better car replacement. Journal of Finance and Economics, 4(4), 1-10. http://dx.doi.org/10.12735/jfe.v4n4p01