Logic of travel insurances

Sappu is all set to go to Australia. Not much money at home these days. What with all the renovation loans. She is gonna make it so much lesser, and I do my bit of dramatic anguishing, if this continues there would be no 1 kg gold, 1 benz car, 1 hot property dowry to go with me in that wedding you so want for me Papa!, i say. Lol. Am actually so secretly happy that assests that may be used for "Investments" are being used for "fluidity". Sound economic sense in motion.
Latest decision is on Travel Insurance. Insure for a few thousand rupees, and get covered for Baggage loss, Passport loss, Identity loss, Body loss, Mind loss, what not! Covers up to some One lakh thousand dollars, with this small premium. Now it being taken that Insurance companies are never stupid, the ratio of a potential loss happening to not happening must be that that that small to offset such ludicrous compensations. Which in turn implies one really does not need an insurance. Which in turn implies humans are really stupid, stupidly imaginative people, who inflate the small , nay miniscule, non existent threats to dimensions large enough to make "insurance" a necessary component of travel and life.
Lakhs and lakhs of travellers funding for the losses of fews and fews. Lakhs and lakhs of travellers losing something significant from their pocket to secure themselves against a probablity of insignificant strength.
This observation itself would have been insignifant, had it just been about that money lost from the pocket. But I fear, this is the small psychology that is the thing. The Fear, that is the root of very existence of society itself. All of us compromising entities of value for guarding ourselves against imagined possibilities of danger that may happen to the few and few.
So much loss for such neurotic fear.