Life insurance (although it shouldn’t be) is, until today, a very controversial topic. There seem to be many different types of life insurance, but in reality there are only two types. They are term insurance and whole life insurance (cash value). Term insurance is pure insurance. Protects you for a certain period of time. Whole Life Insurance is insurance plus a secondary account known as cash value. Generally speaking, consumer reports recommend term insurance as the cheapest option and have had it for some time. But still, life insurance is the most prevalent in today’s society. Which one should we buy?
Let’s talk about the purpose of life insurance. Once we have the proper purpose of insurance in a science, then everything else will be in place. The purpose of life insurance is the same purpose as any other type of insurance. It is to “insure against loss of”. Auto insurance is to insure your car or someone else’s in case of an accident. In other words, since you probably couldn’t pay for the damage yourself, insurance is in place. Homeowners insurance is insurance against the loss of your home or the items it contains. So since you probably couldn’t afford a new house, buy an insurance policy to cover Insurance Agent.
Life insurance is the same. It is to insure against the loss of your life. If she had a family, it would be impossible to support them after her death, so she buys life insurance so that if something happened to her, her family could replace her income. Life insurance is not for you or your descendants to be wealthy or to give them a reason to kill you. Life insurance is not to help you retire (or else it would be called retirement insurance)! Life insurance is to replace your income if you die. But the wicked have led us to believe otherwise, so that they can overcharge us and sell us all kinds of other things to pay us.
How does life insurance work?
Rather than complicate this, I will give a very simple explanation on how and what happens in an insurance policy. In fact, it will be oversimplified because otherwise we would be here all day. This is an example. Let’s say you are 31 years old. A typical 20-year term insurance policy for $ 200,000 would be approximately $ 20 / month. Now … if you wanted to buy a full life insurance policy for $ 200,000, you could pay $ 100 a month for it. So instead of charging you $ 20 (which is the actual cost), you will be overcharged $ 80, which will then be deposited into a savings account.
Now, this $ 80 will continue to accumulate in a separate account for you. Generally, if you want to get some of YOUR money from the account, you can LOAN it from the account and pay it with interest. Now … suppose you should take $ 80 a month and give it to your bank. If you went to withdraw the money from your bank account and were told you had to LOAN your own money and pay it back with interest, it would probably go to someone’s head. But somehow, when it comes to insurance, it’s okay
This is due to the fact that most people do not realize that they are borrowing their own money. The “agent” (from the insurance matrix) will rarely explain it that way. You see, one of the ways that companies get rich is by making people pay them, and then they turn around and borrow their own money and pay more interest. Home equity loans are another example of this, but that’s a completely different sermon.