Why Buy Life Insurance?

When you’re young and healthy, it’s OK to be selfish. When you die, you die. There’s no payout to you. You get no benefit from the money you’ve paid out as premiums.

Except that’s actually the wrong way to look at it. There are two basic types of life insurance policies:
” Term life insurance covers you for a fixed term of years - it’s like a bet. If you die within the term, there’s a payment out to the guys you named in the policy. If you live on, there’s nothing, no payment, not a cent back.
” Permanent life insurance has a cash value. Yes, that’s right. Alongside the death benefit element (the bit you don’t really want to think about), part of your premium is paid into a cash reserve. It’s invested and, guess what, the tax is deferred. The neat part is you can access the investment element in different ways at different times of your life, say to help pay for education or to make your retirement more comfortable. There are several types, the most important being whole life and universal insurance.

Now, one of the interesting facts about life insurance is that it’s really cheap to buy when you’re young. Think about it. With life expectancy going up every year, it’s going to be a long time before anyone can collect on your death. So companies can take your premiums, invest them and get a good return for forty or fifty years. There’s no need for them to be greedy. They take lower premiums spread over a longer period of time.

You’re not going to live a life of celibacy are you, like go into a monastery or convent? If you’re like the majority, you’ll end up in a relationship and have kids. Let’s keep this real. You’ll be part of a family. Hey, all of a sudden, you’ve got responsibilities. Aren’t you glad you took out insurance when it was really cheap!

Better still, if you took out convertible term insurance you can convert it into a permanent policy. If you started with a permanent policy, there’s that cash element sitting there. It can help out in all kinds of useful situations.

Why buy life insurance? Because sooner or later, most people do and, the younger you are when you buy the policy, the cheaper it is - the better value it is.