It’s that time of year. No, not tax time (though it is that, too). It’s birthday season in my family. And with birthday season comes the annual renewal of life insurance policies–specifically, for two of my kids. When I opened the bill yesterday I realized I once again had lost the bet, and was now faced with ante-ing up for another round of the game.
Sounds crass, doesn’t it? But that’s the reality of life insurance (any insurance for that matter). Insurance is intended to cover the cost associated with a particular (bad) event–like your home burning down or your car being damaged. In the case of life insurance, the insurance purpose is to replace the economic value (i.e., present and future earning capacity) to the beneficiary of the person who dies. Taking out life insurance is effectively putting money down on a bet that the insured person is going to die in the next year (assuming annual premiums). If the insurance company loses the bet (the insured person dies), they pay the contracted benefits. If the person who owns the policy loses the bet (the insured person doesn’t die), then they are faced with re-upping the bet for the next round.
Now think about life insurance for your child. Continue reading “Losing The Death Bet (aka Paying For Life Insurance)”