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
Lots of good answers here, but maybe this will help your understanding:
It’s not for you, it’s for people who depend on you if you die.
Some companies push “whole life” or “permanent” plans that pay out whenever you die. In that case, it can essentially be an investment, albeit typically a poor one.
Term, like a 10 year plan when you are young, is relatively cheap. The idea is that you only have people depending on your income for a portion of your life, like when you have kids and a mortgage. If all goes well, by the time you near retirement age, your kids are grown and independent, and you have savings. If you die now, your dependents are fine. That’s why term is nice to have.
Your 100 is also pretty high. That would be a typical premium for like a multi million dollar plan or so, so 12k might be reasonable to know your family would have what they need.
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