Life insurance – property that you own
When purchasing a home, most of us cannot afford to pay the full price in cash. To complete the purchase, we finance the purchase over thirty years or so. At the end, we have property that we hope will have grown or retained its value while we have enjoyed the peace of mind of a home.
how is buying life insurance similar to buying a house?
Can Life Insurance can be seen in a similar light? To begin, we try to understand the potential risks and cost of future expenses such as dying, education needs for dependents, living too long, or living with a chronic illness. How will we finance or pay for these future costs?
Similar to making mortgage payments; we can finance the costs of future expenses by paying in today’s dollars in the form of insurance premiums. For most, we know we cannot afford to pay in cash a lump sum later in life. Through life insurance, we create a similar property that we know and trust what the value of the benefits will be when they are needed.
These benefits can be available while living or at death, and are usually income tax free when structured properly by an insurance professional.
math and science?
It is through math and science that life insurance companies are able to manage these risks successfully. Put simply, they know how many of a certain age group will be alive at certain ages, they just don’t know which ones. This is known as risk pooling and is why many life insurance companies have weathered many ups and downs in the economy over the last 100 years.
avoid big mistakes
By using the time-tested practice of the law of large numbers, the best life insurance companies can protect you while protecting themselves.
Let’s face it; we do not know what the future holds for risk based financial products like stocks, bonds, and mutual funds. However, we do know that the math and science used by life insurance companies to manage their risk has proven to hold up over time.
All guarantees by insurance companies are subject to the claims paying ability of each separate company.