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?
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Insurance is protection from something that you don’t want to happen but if it does happen has economic consequences for you or your family. You pay for peace of mind. Like car insurance I pay it not because I am betting on having an accident but because in the event that I do I am offsetting the consequences. Neither you nor the company want the event to happen but the company is willing to finance the risk cause they offset their own risk by insuring across a population or getting insurance themselves.
Term life insurance works like that. I don’t want to die but if I do I want to ensure my family is protected financially. The insurance company insures across a population to mitigate their risk. Your costs are lower than their potential payout but it works out for the most part.
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