When Life Insurance Isn't Worth It
The principle behind life insurance is simple, in theory. It's also morbid, at least compared to other financial services. You pay small amounts at monthly intervals, so that when you die, a beneficiary of your choice gets a sum of money approximating what you would have earned had you stayed alive.
That's the stark truth right there, which a lot of life insurance customers fail to comprehend: the service is supposed to be nothing more than a replacement plan. The idea is that should your family suffer a crisis that transcends finances, at least their finances won't be impacted too negatively. If you die, your spouse and kids won't have to take on multiple jobs, beg for alms, nor lose the house and car.
Hedging Your Bets
It's important to remember that life insurance isn't really "insurance" in the dictionary sense. When you buy life insurance, you're not "insuring" anything. No matter how much money you give them, Ameriprise can't keep you from dying. No, life insurance is more about hedging your bets than anything else. While you'd prefer to live, if fate has an alternate plan then you can spend money now to help your family avoid multiple catastrophes later.
But as a result of it being called insurance, there's an overly conservative type of person who believes that if "coverage" of some kind is good, then more coverage must be better. Buying life insurance thus becomes a test of one's capacity as a responsible adult and breadwinner. What kind of person doesn't want to protect their loved ones? To that end, some people insure anything that moves – even their children.
Sounds great in principle, until you remember that kids don't earn any money. Or at least not any money that'd be difficult to replace. Which reinforces the morbidity of life insurance: losing a child is such a colossal tragedy that if there's any eventuality that needs to be prepared for, it's that. Some parents argue that they couldn't function after the death of a child, and thus a policy on said child helps them sleep at night. But if you claim you're not going to be able to function anyway, why not keep the money you'd have otherwise spent on life insurance for someone who barely earns any income?
The same goes for older relatives. Both the healthy and infirm have a decreasing amount of time remaining, and the less healthy an older relative is, the smaller the death benefit you'll receive for a policy of a similar premium size. Add retirees' limited income (regardless of how substantial their net worth may be), and much of the time, senior insurance seems like an unwise move.
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That's the stark truth right there, which a lot of life insurance customers fail to comprehend: the service is supposed to be nothing more than a replacement plan. The idea is that should your family suffer a crisis that transcends finances, at least their finances won't be impacted too negatively. If you die, your spouse and kids won't have to take on multiple jobs, beg for alms, nor lose the house and car.
Hedging Your Bets
It's important to remember that life insurance isn't really "insurance" in the dictionary sense. When you buy life insurance, you're not "insuring" anything. No matter how much money you give them, Ameriprise can't keep you from dying. No, life insurance is more about hedging your bets than anything else. While you'd prefer to live, if fate has an alternate plan then you can spend money now to help your family avoid multiple catastrophes later.
But as a result of it being called insurance, there's an overly conservative type of person who believes that if "coverage" of some kind is good, then more coverage must be better. Buying life insurance thus becomes a test of one's capacity as a responsible adult and breadwinner. What kind of person doesn't want to protect their loved ones? To that end, some people insure anything that moves – even their children.
Sounds great in principle, until you remember that kids don't earn any money. Or at least not any money that'd be difficult to replace. Which reinforces the morbidity of life insurance: losing a child is such a colossal tragedy that if there's any eventuality that needs to be prepared for, it's that. Some parents argue that they couldn't function after the death of a child, and thus a policy on said child helps them sleep at night. But if you claim you're not going to be able to function anyway, why not keep the money you'd have otherwise spent on life insurance for someone who barely earns any income?
The same goes for older relatives. Both the healthy and infirm have a decreasing amount of time remaining, and the less healthy an older relative is, the smaller the death benefit you'll receive for a policy of a similar premium size. Add retirees' limited income (regardless of how substantial their net worth may be), and much of the time, senior insurance seems like an unwise move.
read more
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