In almost all cases when a financial advisor is recommending you a insurance policy, they are always recommending you a life insurance policy. However, is life insurance policy really the way you should be insured?
In order to know whether life insurance is the best option, what we need to do is to do a comparison with the alternative option which is term insurance.
Comparing a 30 term with a life insurance policy, a person roughly of the age of 38 will requires a monthly premium of $100 for a term and $1000 for a life.
The difference is that for a term, the insurance will only be in effect for 30 years while a life will last throughout the life time. And, moreover, a term insurance premium is solely for the purpose of insurance while life insurance usually include the saving component.
However, you will be paying a premium of 10 times more for this differences.
If one is to insured with a term insurance and invest the difference in the premium between the policy, for the next 30 years, a term insurance will actually gives you a better return and much more flexible control of your finances.
In this above example, if you re-invest the $900 difference each month for the next 30 years, you can easily have a portfolio of a million dollars.
Thus, it really make more sense to insure in a term insurance rather than a life insurance.
What’s more, an insurance is to insure you against any unexpected mishap, thus the term “insurance”.
If an insurance serves more than the sole purpose of insuring, then it should not be called “insurance”, and when anyone or any product try to do 2 different things at the same time, the result often is worse than the performance of another that solely concentrate on one.