Life Insurance Opinion

[dczech09]

I have been studying the topic of life insurance a bit; it is extremely complex but so fascinating too. I've learned a lot of cool things about life insurance that has further enforced my belief that term beats permanent hands down. One particularly interesting thing I have found is this issue of the insurance company making money.

Now in today's society, you pay money for a product or service. Insurance is no different- you compensate the insurance company for assuming the risk of a negative event. Some people are under this delusion that insurance companies make so much more money on selling term life than whole life because statistically about 2% of term policies ever file a claim. My thought is simple: who cares? The amount of money the insurance company generates from a certain product should be irrelant to your decision making. Same goes for an agent making a much larger commission of whole life. Really the only thing that should factor in is cost and value added.

What are your thoughts? What type of policy generates more money for the insurance company? Should that factor into individuals' decision making?

[disneysteve]

I utterly and completely do not care how much money the insurance company makes on any given policy. It isn't my job to earn money for the company. All I care about is getting myself the coverage that I need and doing so at a reasonable price.

I would certainly assume that they make more money on whole life since the policies cost 5 times as much for the same amount of coverage. That's why they are able to pay salespeople such huge commissions for selling them.

[jpg7n16]

I have been studying the topic of life insurance a bit; it is extremely complex but so fascinating too. I've learned a lot of cool things about life insurance that has further enforced my belief that term beats permanent hands down. One particularly interesting thing I have found is this issue of the insurance company making money.

There are a few cases where permanent beats term. But they are only a few. Usually, they work better for a certain purpose. (estate liquidity, business buyout arrangments, uninsurability)

For estate liquidity, the need for insurance is lifelong. There is never a point where the insurance may no longer be needed. Term wouldn't be able to provide that same protection, without rates eventually raising to prohibitive levels.

So here is my thought: for 90+% of the cases, term is more appropriate than whole life. But insurance salespeople try and sell permanent 90+% of the time.

What are your thoughts? What type of policy generates more money for the insurance company? Should that factor into individuals' decision making?

For the rest of your post I agree completely with DS.

Insurance is a funny product. It's one of very few products you'll ever buy - hoping that you never have to use it.

(spare tire, personal firearm, tornado cellar, etc.)