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Is life insurance a waste of money?

You don’t have to work all that long in the life insurance industry to realize that beneath a lot of “objections” people have about life insurance is the underlying belief that a lot of folks have which is…

“Life Insurance is a waste of money!”

After all…

Most folks who choose to purchase a life insurance policy (particularly a term life insurance policy) won’t ever collect the policy death benefit attached to it.

This is because…

Most policy holders won’t actually die during the “term period” that they purchased their life insurance policy and/or they will allow their policy to LAPSE because they no longer wish to remain insured.

Which makes sense…

When you think about it because, insurance companies are pretty good at determining how long someone will live (even if you apply for a no medical exam term life insurance policy) and as one ages, it makes sense for some folks to determine that their “insurance need” no longer exists (kids are grown, house is paid off, they’ve retired, etc.) so what’s the use of paying for the insurance any longer.

Unfortunately though…

Because most individual policies won’t be paid out by an insurance company, many within the general public will see this fact and use it as a reason not to purchase a life insurance policy.  After all, most folks just pay for their insurance year and year, and ultimately get nothing in return.

Which is true…

However, what about those who do unfortunately die during while insured?  What happens then?  Well in situations where an insured purchased the proper life insurance policy for his or her family, what happens is that their family will likely receive an ENORMOUS return on the money that they spent for their insurance.

In situations like these…

What you’re likely going to find is that the beneficiaries of the insured are quite relieved that there was an insurance policy in place to help them deal with any of the financial repricussions that may exist due to the insureds premature death.

Clearly refuting the idea…

“That life insurance is a waste of money!”

But here at IBUSA, we’ve been doing this for long enough to know that simply telling someone that insurance isn’t a waste of money because there is a “chance” that they could die while insured so we wanted to take a moment and discuss some other reasons “why” someone might be inclined to change their mind about the “value” of owning a life insurance policy.

Topics that will be discussed in this article will include:

  • Term life insurance vs. whole life insurance.
  • Return of premium life insurance (ROP).
  • Living benefits.
  • How to can I be sure that I get the best “deal” for my insurance?

So, without further ado, let’s dive right in!

Term Life Insurance vs. Whole Life Insurance.

Here’s a topic that definitely warrants its own article (in fact we have one Term vs. Whole Life) however for our purposes here, we want to keep things simple cause all we’re trying to do is answer the question of whether or not…

“Life Insurance is a waste of money!”

And since one of the biggest arguments people have that it is, is that their family isn’t going to receive a benefit from the insurance, so why buy it?

Well…

Should one choose to purchase a Whole Life Insurance Policy, and choose to keep making payments on it, eventually, your beneficiary will receive the death benefit that you purchased with it (provided you never borrowed from the policy while alive).

The only problem is…

Because a whole life insurance policy will ultimately payout upon your death and won’t expire prior to your death assuming you continue to make any and all premium payments, these “types” of life insurance policies typically cost seven to ten times more than a traditional term life insurance policy.  Which is why, most folks choose to only purchase a term life insurance policy instead.

That is of course…

We’re only talking about people looking to purchase a life insurance policy exclusively for the “death benefit” that it will provide to your loved ones.

For those looking to use a life insurance policy for “other purposes” most will find that a whole life insurance policy will provide a wider variety of “other options” to choose from which we will discuss here briefly later on in this article.

But before…

We begin discussion some of the “additional benefits” purchasing a whole life insurance policy may provide, lets continue our discussion of term life insurance, and how there are options one can pursue which may help one decide whether or not purchasing one will be a complete waste of money.

Return of premium life insurance (ROP).

Another option that some who believe that…

“Life Insurance is a waste of money!”

Is to pursue purchasing a Return of Premium Term Life Insurance Policy.  These are term life insurance policies which will return or “refund” all of the money that an individual paid for their insurance over the life of the policy if and when the “term” expires.

Some companies…

May also offer a “partial return of premium” if an insured wishes to cancel their policy early and not wait until the entire term of the policy expires.

The down side…

To these “types” of term life insurance policies is that they’ll usually cost approximately three to five times what a traditional term life insurance policy would cost.

The up side…

Is that if decide to keep your policy for the entire term, you will receive 100% of the money that you paid to the insurance policy in the end.

Many insurance companies…

Are willing to offer these types of life insurance policies because what you’re basically doing is paying more for your term life insurance policy which acts as an interest free loan to the insurance company which they can then invest elsewhere.  This is why many financial advisors will advise against purchasing a ROP term life insurance policy because they would rather have you use the extra money paid then give it to an insurance company “interest free”.

Since we’re not…

Financial advisors, we’ll leave that decision up to you, we’re just letting you know that this option exists should you choose to pursue it.

Living benefits.

One benefit that a lot of individuals fail to take into consideration when trying to decide whether…

“Life Insurance is a waste of money!”

Is that some life insurance companies will allow their policy holders to purchase additional “riders” that can be added to their policy which can provide additional protection to an insured while they are LIVING (thus the Living Benefits)!

Such riders can include:

  • Accelerated death benefit
  • Disability waiver of premium
  • Long term care rider
  • Chronic illness rider
  • Disability income rider

So…

If you can imagine yourself dying during over the next 10 to 30 years, perhaps it might be more imaginable that you may suffer some type of injury which could warrant the need for one of these aforementioned living benefit riders.

But ultimately…

What we have found is that for a lot of folks who are skeptical about whether or not…

“Life Insurance is a waste of money!”

It’s going to come down to cost.  Because after all, if life insurance were free, we doubt that many people would turn it down.  So, our advice to those who are considering whether or not it makes sense to purchase a life insurance policy or not, is to “hold off” on making any preliminary judgments until you know exactly what it would cost you.  This way, you’ll have a better idea if it’s worth it to you.

Which brings us to our next topic which is…

How to can I be sure that I get the best “deal” for my insurance?

When trying to find the best “deal” on your life insurance policy, the first thing that you’re going to want to do is first focus on what your insurance “needs” are.  This way you’ll be able to narrow your search to the right “type” of life insurance policy.

From there…

You’re then going to want to focus on which life insurance company is going to provide you with the greatest opportunity for success.  This means that going to want to “shop” your options before you actually apply for coverage.  This is an important step because, not all life insurance companies are going to use the same criteria for who they will and won’t insure.  The insurance companies are also going to use different criteria when determining what one will have to pay for their insurance which is why it’s important to “shop” around a bit before you actually apply with any one company.

The good news is…

That because we here at IBUSA have chosen to remain an independent life insurance brokerage, we are able to work with dozens of different life insurance companies so that the laborious process of “shopping” multiple insurance companies doesn’t need to be difficult.  In fact, it’s something that we can help you do effortlessly!

So, what are you waiting for?  Give us a call today and let us show you what we can do for you!

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