Final answer:
The average person may overestimate their own risk of an insurable event happening due to factors like availability heuristic and the Dunning-Kruger effect.
Step-by-step explanation:
The average person may overestimate their own risk of an insurable event happening due to several factors. One factor is the availability heuristic, where people tend to judge the likelihood of an event based on how readily examples of it come to mind. For example, people in the United States may overestimate the risk of dying in a criminal attack because they can easily recall vivid stories of such incidents. Additionally, the Dunning-Kruger effect can contribute to overestimating one's risk. This psychological phenomenon causes incompetent people to rate their own knowledge higher than they should, while highly competent individuals rate their knowledge slightly lower than they should. Therefore, an average person may inaccurately assess their own risk due to these cognitive biases.