Life insurance, a lot of people consider this at least once in their life time. Is life insurance really worth it? Is it a waste of time and money? First of all, lets critically understand what this life insurance is.
What is Life Insurance?
Life insurance is a contract between a person and an insurer or assurer (The Company) where the insurer pays a certain amount of money upon the death of said person. It can also be paid upon terminal illness or injury depending on the contract agreed on.
Looking at it critically and more plainly, in life insurance, a person pays a certain amount of money every month to the insurance company so that when you die, anyone you choose as the beneficiary gets a certain amount of money that would sum up what you would have earned if you stayed alive. The money can be received as a lump sum or can be paid monthly.
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Why Life Insurance May be Considered
- Children; having life insurance gives a parent rest of mind. It assures them that if they were to pass away, the burden on their children wont be heavy.
- Mortgage; If you were to buy a new house, car or something valuable on credit, having life insurance ensures your debt does not get passed down
- Marriage; After getting married, partners can go into life insurance so if one of them were to meet an early demise, they’ll be leaving something behind for the other.
Is Life Insurance a Waste of Time and Money?
Look at it like this, all that money you’ve been paying (or could be potentially be paying) for all those years, what if you had put that money into something else? You could invest your money in something and it could pay off more if planned and executed properly.
Remember that investing is deferring spending in hopes of a financial gain. Insuring is spending now in hopes of avoiding financial loss. In that respect, the two activities are almost opposites. An insurance policy that masquerades as an investment is rarely going to be your best option for accomplishing the conflicting goals of maximizing return while minimizing risk.
Is Life Insurance Really Worth It?
There is definitely no simple answer to this question, there are a lot of facts to consider before doing something like this. Individuals who go for life insurance usually have something specific as per why they’re doing it. It’s arguable but there are better ways planning for the inevitable aside for life insurance. Investments, joint savings a good plan are basic alternatives to life insurance that people tend to ignore.
KEY TAKE AWAYS
- Life insurance products offer a way to provide financial funds for beneficiaries after a plan owner’s death.
- Basic life insurance policies are designed to provide replacement funds that can approximately match what the policy owner was making or a percentage of it.
- A life insurance policy on someone with no earnings or someone with no dependent beneficiaries can be a waste of money.
- Term life, whole life, and universal life insurance policies can all be options with some very different provisions.