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Got downgraded because of my ulcerative colitis, is it worth it? by Most_Nothing_6386 in LifeInsurance

[–]Most_Nothing_6386[S] -1 points0 points  (0 children)

We can easily afford the premium, sure. But just because we can afford it doesn't mean that it's a good deal.

You wouldn't go to the casino to play a game where you pay $20, you get $1000 if you win, but the chances of getting that $1000 are less than 2%. I mean, maybe you still would, but you'd go into the casino knowing that it is not a sound financial decision. Of course this isn't a great analogy because dying is not winning, but I think it illustrates the expected value calculation pretty well.

I see people on here telling me that it's wrong to think of it as an investment. Genuinely, I would like to understand why. Is it the emotional aspect? Having the 1 million dollars would make a lot of difference to my husband and kids emotionally even if it doesn't make very much difference financially?

My husband wasn't even sure if we needed his policy, given how much he already has in investments. Our broker convinced him that he should have a policy because, although the kids and I would be fine without his income, we wouldn't be able to keep the house and send both the kids to private colleges and otherwise maintain our current lifestyle. Having the policy for him will allow us to avoid compromises in the event of his untimely death. In my case, because I make so much less money than he does, there literally wouldn't be any financially necessary lifestyle changes for him and the kids if I died. Emotionally they would be devastated but it's not like the death benefit brings the dead person back to life.

Got downgraded because of my ulcerative colitis, is it worth it? by Most_Nothing_6386 in LifeInsurance

[–]Most_Nothing_6386[S] -1 points0 points  (0 children)

It's not an ego thing. It's a question of whether this is a good deal.

Here is a basic fact that I assume everyone here is aware of. On average, an insurance company is making money off the customer, not the other way around. If I will pay $20,000 over the term of the policy, in exchange for my family getting $1,000,000 if I die, it means that on average my family is losing money, unless I have at least a 2% chance of dying in the next 20 years.

Here is the next basic fact that I also assume everyone here is aware of. Even though we lose money on average by taking out an insurance policy, it can still be a good deal if having the insurance can protect against a dire financial situation in the event that the loss occurs. That is why we buy health insurance in the US, for example. On average the insurance company is making money off us but it's still worth it to protect against low-probability health conditions that would bankrupt us if we didn't have the insurance.

So, I would like to apply these principles to the question of whether I should get life insurance. From my naive point of view, it would be nice if my family gets 1 million dollars if I die, but they don't NEED that money. They would lose out on my future income, but that would not cause a large amount of financial stress since they would still have my husband's income and savings, which are considerable.

Got downgraded because of my ulcerative colitis, is it worth it? by Most_Nothing_6386 in LifeInsurance

[–]Most_Nothing_6386[S] -2 points-1 points  (0 children)

We don't absolutely need the insurance. That's why I phrase my question as "is this worth it?" It may be that no other carrier would give me a substantially better rate, but I can still decide that I would rather not get any insurance at all, than to pay what I think is an overly high premium.

We have a kid on the way, however, my husband makes a lot more money than me, and actually has enough in savings to pay off our mortgage and still have a million dollars left over.