BONNYS
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I was thinking about life insurance the other day (for that matter any insurance really). Aren't you just betting that something bad is going to happen? Wouldn't it be better and more optimistic to put the money you would pay towards insurance into a savings account?
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Thu Nov 22, 2007 10:00 am |
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oldguy
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Location: arizona
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quote:
Wouldn't it be better and more optimistic to put the money you would pay towards insurance into a savings account?
If you changed your question from 'savings account' to an 'equity accouunt', you would be right. Insurance companies make a profit, in addition to paying claims, so, on average, it would be chaeper to just pay the claim yourself. Ie, self-insure whatever you can and you will be wealthier.
Few of us are willing to self-insure against a house fire because the loss is so great. But a house fire happens only about every 75 years, the $400/yr premium would be over $15M if you invested it instead - but most people want to insure against that risk, it is too big.
An extended car warranty is insurance against a breakdown. It is a high profit item - and about the worst thing that happens is an automatic transmission for $3000, so you are way ahead to self-insure. And most middle class people do - the working poor tend to buy the extended warranty because $3000 would be a disaster.
Healthcare is a risk that most of us want to share - a $200,000 By-pass would mean financial ruin for most families.
Life insurance is required during the time that you have dependants that depend on your income - after that most people have no need for it. (I don't have life insurance).
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Fri Nov 23, 2007 5:43 am |
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Apollo
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I agree with oldguy on life-insurance. You are better off to pay that 'premium' to yourself and invest in instead of having life insurance.
Like oldguy said, life insurance is for that time-period that you have dependants on your income and I don't think you should have dependants until you are financially independant. That's just my personal opinion.
I think life insurance is a waste of money but one tool for the middle-class to feel a bit more secure.
It is not smart to play it safe but it is safe to play it smart.
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Fri Nov 23, 2007 10:01 am |
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ukey
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Location: Singapore
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heeee...i used to bother myself about this question also. The thing is, if I did not insist on getting a good financial education, I would still be buying a life insurance. now I only go for term.
The rationale is if you invest a bit on urself, then you will at least know the workings of the market better, and be able to generate better returns for your money.
of course the flip sie is u need to spend your time doing this....and are you willing to do so? also you need alot of discipline as profits tends to make you feel powerful and you will spend more as a result.
on the other insurance, i would go for critical illness, hospitalization and accident plans, plus a few term to complete my portfolio.
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Sat Nov 24, 2007 4:41 am |
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efflandt
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Insurance is a good idea for losses you cannot handle, or if you are no longer around for people who depend on you.
I foolishly got whole life insurance when younger, one childhood policy converted after I became an adult, and another when misled by a neighbor (who said it would be paid up in 5 years, but actually at age 90). I used the cash value of the latter towards down payment on a home. And since my 401k/IRA were well on their way to providing retirement needs, and the cash accumulation would dwindle as the insurance cost increased as I aged, surrendered the earlier policy to start my Roth IRA. So I have significant assets protected in retirement accounts, but no life insurance.
On the other hand my mother in her late 70's was considering starting a life insurance policy as an inheritance thing. Although, she is converting money into a Roth, required minimum distributions from an IRA are not qualified for Roth conversion. So she figured we could get more tax free from insurance than she would pay into it. I don't know if she bought that policy, but is in excellent health and could live another 20 years (her mother died within 10 yrs of her current age).
As far as other insurance, I purchased my 95 Maxima SE in May 94, 13 years ago and dropped collision and comprehensive on it years ago (currently worth $2000-3000). But I am a skilled driver (Solo II and high speed autocross competition) and have a spare vehicle, so if it was gone tomorrow, that is no great hardship. But if someone with little savings was depending upon one vehicle to get to, or do their job, collision, comprehensive, and rental coverage might be essential.
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Sat Nov 24, 2007 9:02 pm |
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thebeacon
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Location: California
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Well if you save enough and fast enough you might actually get ahead.  Life insurance is something that you have to get. Life insurance should be something you need to get. You might want to consult with financial adviser.
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Tue Dec 11, 2007 6:39 am |
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