Life Insurance: What Good Is It, Really?
A while back, a solicitation came in the mail for a life insurance policy. This is nothing particularly new or startling--it is, in fact, a rather commonplace occurrence. It's all part of the junk mail phenomenon we deal with on a daily basis. Various businesses manage to buy lists of names and addresses to pester as many people as possible with assorted sales pitches.
The older you get, the more often you will get solicitations to purchase life insurance. If it were not for the waste of resources in these mass mailings, I’d find it comical. What is the point, after all? This time, I decided to really look through the material before sending it to the shredder.
Typical of most sales pitches, the mailing was full of hyperbole and promises with little substance. I've put the images of two of the pages here for everyone to see, but I did black out the name of the company, to avoid any problems with copyright issues or other legalities that might be involved.
The first thing you notice is that the information is somewhat contradictory, telling you that your policy can never be cancelled “due to age or health.”
Oh? If they must specify two conditions under which the benefits won’t go down, I must ask, what is the omitted information?
What are the bases upon which benefits can be reduced? Outside of the obvious condition of non-payment of the “premiums” (a.k.a. bills), I can think of no reason, except that they've left a deliberate loophole.
Coverage is available “to age 100,” yet you may not apply past the age of 85. Very interesting. Why not? Should that not be up to the individual?
Double Standards are Not Dead
The next thing I noticed was differing rates for men and women. It costs more for men. In the 21st century, we still have the old double-standards.
This time, it is in favor of women instead of against, but it’s a double standard all the same.
Chart Shows a Higher Cost For Men
The So-Called "Details"
Foolish Selling Points
One of the main “advantages” these mailed mouthpieces like to emphasize is the ability to use the paid-in equity in the policy as a savings account against which you can borrow for emergencies or other needs…”even for household repairs,” it says in this particular mailer.
That’s all well and good, however, while this may be an “interest-free loan” of sorts, if you don’t pay back those “emergency” withdrawals, (they don’t mention this in the sales pitch), your eventual benefits paid out will be shorted by the amount you borrowed.
Wouldn't it just make more sense to put those monies into a savings account yourself, and gain even what paltry interest is currently being offered? Instead, you are paying out money on a “life insurance” policy that does not pay any interest.
Indeed, your money is invested and pays interest to the insurance company; at a much higher rate, I assure you, than any bank is offering to private individuals.
Insuring Your Life?
Are you really insuring your life, as the title of the policy implies? If that were the case, it could be argued that you never expect to die, and the policy would pay off only in the event that you did.
Funny thing about life--you don’t get out of it alive. I haven’t met any immortals, have you?
All insurance is essentially a gambling game, with the policy holder betting against themselves that at some point they will need the purchased coverage, and the insurer betting that they will not need to pay out. Life insurance surely seems to be a foolish gamble on both sides. Everyone loses, for you cannot insure against the inevitable.
The policy stops if you live to be 100 years old. They will just give you the cash value of the policy, less any amount you may have borrowed, and not repaid. What if you're one of those souls who live to see their 105th or later birthday? Hardly seems fair; it wouldn't cost them any more. After all, it's really your own money they're giving back to you, or to your family, at payout, . Why should they care how long you live?
Oh, and here’s an interesting twist: they won’t pay for death by suicide until the policyholder has had the coverage for two years. So, if you plan to buy life insurance, then off yourself, you’ll have to plan well in advance.
If the policy is supposed to pay when you die, then the cause should not matter, nor should the timing. It’s a loophole.
Shouldn't this form of insurance be called a “death expenses savings account?” For that is what it truly is. They like to offer all sorts of scary figures about the high cost of funerals, and how little is paid by the Social Security “death benefit.” That much is true: they pay a little over $200, which is far short of the usual funeral costs.
Save Your Money Yourself
Part of the problem is that we, in this culture, seem to find death and preparations for death to be a nearly-taboo topic. It is only among the elderly that such discussions seem acceptable, for they know their remaining time may be short, and have learned to face the inevitable.
So, if you want to offset the costs of your own funeral at whatever date in the future, start yourself a savings account; perhaps one with a limited ability to withdraw funds before a certain time frame, and keep the interest money for yourself.
Let your family know that this is the death expenses money, not to be touched for any other reason; it’s not the kids’ college fund, nor is it for household repairs, it is to self-insure against those dastardly funeral costs that come to us all.
High Funeral Costs: Whose Fault?
On the other side of the argument, however, is the fact that funerary arrangements in this country are a huge, overpriced business. While the mortuary business does provide a needed service, they are not above the application of subtle, and often not-so-subtle, guilt trips in trying to ‘upsell’ grieving families into more expensive products and services.
This, I find shameful; it is the direct cause of the great expense mentioned in the insurance industry’s sales pitches. Families need to stand firm and not opt for excessive, expensive and unneeded upgrades. Keep it simple.
The funeral, you must remember, is not for the dead--they aren't there; they don’t care. Funerals are to impress the still-living, and this is no place to play the one-upmanship game. The comfort factor should come from whatever version of memorial service people choose, and not from fancy caskets that will never be seen again.
When my mother died, she had expressed a desire to be cremated. Painful though it was, I went along with her wishes. And when the funeral director asked what casket I wanted, I said, “None."
It would have offended my Mom’s sense of Yankee frugality to buy an expensive casket just to burn up.” I chose, (emotionally hard as it was for me), a plain cardboard box, so honoring both her wishes and her memory by respecting what were her sensibilities in life.
© 2013 Liz Elias