Maybe I just don’t understand what they’re doing. BUt it seems to me if I take out a 10 year policy that costs $100 per month, I’m betting that I’m going to die within that period of time and the company is betting that I won’t or that they won’t have to pay out. If I get to the end of that 10 year term, then I’m just out $12,000. What am I missing?
In: 116
You’re exactly right that you’re betting you’ll die. You aren’t going to get any benefit out of that term life insurance policy yourself, but you might have other people who depend on you that could benefit. If you are married and you and your spouse own a house but neither of you could manage the mortgage on your own, a term life policy means your spouse can stay in the house even if you die and your income is gone. Same idea for people who have kids at home – those kids depend on your salary to support them, so a term life insurance policy could benefit them if you die.
Every insurance is a bet that something bad will happen to you. “I bet I’ll get sick” – health insurance. “I bet I’ll get sued” – malpractice insurance. “I bet I’ll get laid off” – unemployment insurance. In the case of life insurance, you aren’t the person who gets paid if you “win” the bet, but someone you are supporting financially will.
(Note: if you are married, there’s a good chance you/your spouse will be financially FUCKED if one of you dies. Term life insurance doesn’t bring you back, but it does make the practical challenges of getting on with your/your spouse’s life easier. If you are both working, it’s probably a good idea to get at least some term life insurance.)
(Additional note: whole life insurance is different from term life insurance. Don’t buy whole life insurance. It’s an appropriate purchase for the right person, but if you’re one of the people who should buy whole life insurance then you already know that you’re in that category. It’s a terrible deal for 95%+ of us.)
Latest Answers