Life Insurance

Posted on | May 20, 2010

There are a lot of life insurance companies out there and they all advertise on the same base principle of helping your loved one after you pass. For only so much a month, we guarantee so much money at time of death. Well to be frank, this whole set up is essentially a scam, and here is why:

A life insurance company, is in fact, a company (go figure right). What this means is that there goal is to make a profit. Meaning that there goal is to get more money coming in then they have money going out. So, per client they insure, the client is going to end up paying more to them then they will pay to the clients family upon decease, if the client dies at all while under the coverage.

Now, one can imagine that this could balance out to not be that terrible of a thing if the profit margin isn’t that great. However, every time you see an ad on TV, or hear an ad in the radio, that is more money that comes from our “monthly payments”. All the employees they hire get paid from these funds as well, in addition to the high CEO paycheck. When all is said and done, if life insurance was truly “worth it”, then these companies would not stay in business.

Now there are different kinds of life insurance, and some promise help for retirement, but these plans are even worse. If you are worried about an accident keeping your family financially secure in case of one, then term life insurance is the way to go. Though whole life insurance does provide some return on investment, it is only about 2.5% annual, which is a fraction of what a healthy market portfolio would provide. If one invests the difference in cost between term and whole insurance over the period of the term, they will find that when the term is up, and if they find themselves still breathing, their investment return will most likely already cover what the whole insurance return would have been. At this point the person can be their own life insurance.

Essentially, the trick is to invest wisely and save carefully. Remember that any company out there has the goal to make money.

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Category: Aging in America
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