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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The idea of a term policy is that it provides short term coverage. So for example let’s say you live in a single income household, have a young child, a stay at home spouse, and a mortgage with 20 years left on it. A term policy is intended to provide financial assistance for your family should you die before you’ve had enough time in the labor market to build a large savings to leave behind/cover your bills. Don’t think of it as a financial investment, because all insurance is a bad investment. The benefit offered by term insurance may or may not be of value to you, but it’s not intended to be a good financial investment.
Edit: a term life insurance policy offers the same benefit as a more expensive whole life policy, except doesn’t build value like a whole life policy does, and therefore is much cheaper to purchase.
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