What Makes Life Insurance Worth the Money?
Life insurance is often confused with other forms of insurance, and with investments. When people do this, they tend to incorrectly assess the value of the product. The fact of the matter is that conventional cost-benefit analysis is insufficient by itself for determining whether or not the purchase of a policy would be worth it. However, once you add a realistic understanding of mortality, life insurance becomes a great deal. Here are two qualities of the product which make it truly unique.
Life Insurance Gives a Guaranteed Payout
Life insurance is the only form of insurance in which a claim is guaranteed. You can buy medical insurance, and never get sick or hurt. You can buy disability insurance, and never miss work due to accident or illness. You can buy professional liability insurance, and never get sued. You can buy property and casualty insurance, and never suffer damage to your home, business, or car.
But it is absolutely guaranteed that you will die. Therefore, it is absolutely guaranteed that a benefit will be paid. Of course, you have to keep the policy in force for as long as you live. This is why permanent insurance makes the purchase worth it more than term insurance. People often buy term insurance and then outlive the policy. No way to collect then.
Life Insurance Gives an Immediate Benefit
Once the policy is delivered and paid for, the coverage is in force. This means that should a tragedy occur the very next day, a claim could be filed. Think about that for a second. As little as one monthly payment could have been submitted, yet the entire death benefit could be paid in a few short days. This is a tremendous deal financially, yet people often minimize it. Why?
Many people fall into the trap of predicting mortality. They take an optimistic view of their own health, their family medical history, and their lifestyle, and make “confident” projections about how long they will live. I cannot blame them, for most people have very little experience with mortality. In their personal and professional lives, most people have very few encounters with death.
Life Insurance for Unexpected Circumstances
The fact of the matter is that any person’s final day could come tomorrow. Let me share with you just a few examples in which someone I knew in business, or in my personal life, died completely unexpectedly:
- A young couple with two young children were killed by a drunk driver who crashed into their car.
- An older woman fell down the stairs and died of complications to a head injury.
- A middle-aged man with diabetes suddenly developed pancreatic cancer and was dead within three weeks of that diagnosis.
Once you acknowledge that there are innumerable potential causes of death that are beyond our control, you realize that the immediate availability of the life insurance death benefit makes it the deal of the century. You just cannot predict when that claim will be paid.
Thinking Out-of-the-Box with Life Insurance
Factoring in mortality to their thinking is no doubt a challenge for most people. This is especially true in a society in which many of us crunch abstract numbers for a living. But once you think out-of-the-box and appreciate the extent to which life itself dictates events, it is easier to adopt an attitude of simply being prepared. The purchase of life insurance then becomes very much worth it.