Have you ever bought something that didn’t do what you wanted it to do? It’s frustrating when something doesn’t work the way it’s supposed to right out of the box.
When reality doesn’t meet our expectations, we get disappointed.
So when I heard a 50-year-old man complaining that he wasted 20 years of his life paying into a term life insurance policy, I couldn’t help but think: Is life insurance a waste of money, or did he just not have the right expectations going into it?
What Good is Life Insurance?
Not everyone needs life insurance. A single 24-year-old with no debt and no family might not want to pay into a life insurance policy – especially if they don’t expect to have a family any time soon. A 30-year-old mother of three who works as a physician would probably want to have a very large life insurance policy in case she passed away before her children were grown.
The point of life insurance is to provide for your loved ones after you pass away. Your goal may be to provide enough to pay off your home and to pay for your children’s college if you passed away early.
But here’s what life insurance is not: it is not a free pass to neglect saving for those events. It’s simply irresponsible to treat life insurance as such.
Remember that 50-year-old who grumbled about paying into a life insurance policy for 20 years and claimed that it was a ‘waste’ of his money? He didn’t have any retirement savings, college savings, or emergency fund. He was expecting his life insurance to do something it wasn’t designed to do. He didn’t take responsibility for his lack of discipline in saving.
What that person didn’t realize was that his life insurance policy gave him exactly what he paid for all those years: peace of mind.
Every month that you pay your life insurance premium, you’re paying for the peace of mind in knowing that your family would be covered if you passed away. That’s what you’re paying for. You’ll never see the money…you have to die before it’s paid out. A simple term life insurance policy gives people exactly what they pay for. Expecting anything more would be unrealistic.
End of rant.
Ok, seriously though. Term life insurance isn’t a waste of money if you set your expectations correctly. That’s like thinking your pick up truck is a waste of money because it doesn’t get 100 miles per gallon. It wasn’t designed to get 100 mpg. It was designed to move you from point A to B. We set ourselves up for disappointment when our expectations are out of sync with reality.
The Next Step: Researching Life Insurance
I strongly encourage you to do some research about term life insurance. My friend Jeff at Good Financial Cents is hosting the Life Insurance Movement – an initiative to educate people about the importance of life insurance. Here are some helpful articles that can help you in setting your expectations about life insurance.
Life Insurance 101: Types of Life Insurance Explained
Why I Purchased a $2.5 million dollar life insurance policy.
{ 3 comments… read them below or add one }
It’s true that some people think life insurance is worth of money. But the reality is that it has a lot of benefits for us and for our family. Life insurance coverage properly planned will on premature dying provide funds to cope with money due, mortgages, and bills. It provides protection towards the family you depart behind and works as a cash resource.
I always buy life insurance for it’s “living benefits” rather than for it’s its “protection” or “death benefits.” In purchasing it this way I have always ended up with more “protection” or “death benefits” than I normally would have. Then I “use” my insurance while I am alive to provide for all those things that you say we should be saving for.
Thank you