The Argument Against Buying Life Insurance Policies - Term Life Insurance
The argument against buying life insurance policies is well-known among traditional financial planners. With respect to Term Life Insurance, this factualstatistic speaks volumes:
Only 1% of all Term Life Policies will ultimately pay death benefits.Why? Because only 1% of policy holders maintain coverage beyond 15-20 years. (Penn State University, 1993 Study) , because only 1% of policy holders maintain coverage beyond 15-20 years. (Penn State University, 1993 Study)
Stateddifferently, Term Life Insurance Policies offer the greatest death benefits for the lowest initial cost, but almostnobody dies with Term Insurance in place! Thus, the lost opportunity cost of owning Term Insurance (premiums paid that could have been invested elsewhere) far outweighs the "low cost" of owning Term Insurance while you were young and healthy.
The Argument Against Buying Life Insurance Policies - Whole Life Insurance
The argument against buying life insurance policies extends to Whole Life Insurance. Here, the standard argument is that Whole Life Insurance costs more because of the cash value investment component andWhole Life Insurance can't compete with higher-returning financial products. Despite the fact thatWhole Life Insurance generates a safe, long-term return on investment, most financial planners believe there are other safe investment alternatives that consistently generate higher returns.
Although the argument against buying life insurance policies probably holds against Term Life Insurance, there's an important distinction when analyzing Whole Life Insurance. The investment component is only one part of the equation. Aspecially-designed Whole Life Insurance policy can dramatically address the costs of financing that offset investment returns. More specifically,an extra percent return on investment means very little if 35% is being paid in financing costs related to homes, cars, and living expenses! Whole Life Insurance can provide a powerful solution to this sad, financial reality for many of us!