In Short, Life Insurance is a rip off. If you absolutely can’t hang onto your money, but you can pay a bill, then insurance policies may be the right thing for you. Otherwise, you’re better off saving your own money. Let’s do the math.
Today I received in the mail an letter for life insurance policies, yet at the same time, it’s for anyone between the ages of 45-85 and those are broken into different categories. There are in fact, eight different age groups, but I’m 30, why are they sending me this crap to begin?
Prices of the product vary as well. The prices range from $32.50 at the 45-49 age range to $166 at the 80-85 age range. That’s per month of course. Even then if we broke down the math even further…..
45 years of age onward to 85 is a difference of 40 years. With me so far? Good, this is all simple math, don’t worry. Let’s take that 40 years and multiply it by 12 months. If you got 480 months, we’re good to go.
Multiply that 480 months by the cost of $32.50 which is the lowest age bracket. That comes to $15,600. Where’s the problem? It’s a $10,000 life insurance policy. Now do you see my point?
Those of us who are disciplined enough to save our own money, can come out way ahead. Again, I’m 30 years old, let’s add another 15 years to that 40 for a total of 55 years. You should now have a total of 660 months. Multiply that again by $32.50 and you come up with $21,450. Not a bad life insurance policy is it? At least not compared to that $10,000 one.
All of this is done of course without adding interest to the pot. If you put your money in the bank, it would be even higher. However, nowadays, the bank isn’t exactly the best bet for your money. Another thing to look at is if you’re just a little bit smarter with your money and invest it into something that will give you higher gains, you could easily double that into the $40,000 – $50,000 range.
What does all this mean? For the price of a $10,000 insurance policy, you could have a $50,000 or better policy. It all depends on several factors: your discipline, how much you put back, and how wisely you invest. Seriously though? Do owe want our death to be more of a burden on our families than it already is? It’s time for us to start thinking ahead and doing things our way instead of their way.
Death is Coming. Are You Prepared?
I used to sell life insurance (about 25 years ago for a few months) and was really bad at it because I told the truth (“No,you don’t really need this…”) In fact, I only sold two policies; one to my dad and one to myself. I agree with what you’ve written here.
Rhia http://dr-rhia.blogspot.com/2012/02/feelings.html
Glad to see you like the article. Very few things in the insurance world makes sense. For example, how can one have a quarter million or half million dollar insurance policy for $35 -$60 per month? The math doesn’t add up.
Nice article and makes me want to save my money.
But…
I pay $60 a month for $350000 of cover and a whole lot of other things, like redundancy cover etc, and I doubt I can save that much in that sort of time frame… I’m 27 years old, but I guess once the mortgage is paid I won’t need the life cover.
Mick, if you were smart, you would take that money and invest it. In fact, take what ever extra money you can and invest it. That’s how the rich get rich. They started from much of nothing and now they’re millionaires or billionaires. I think that insurance policies are a waste of time, you’ll get a much better return by planning for retirement instead. Then when you die, you’re family will be able to afford that funeral, or to live.
Bank interest is quite low these days
Yeah, it is quite low nowadays, but there are other ways to earn higher interest.