Whole-Life Cost

and finance Allah shmoop What is whole life insurance Well

if health insurance is a safety net for your health

then guess what life insurance is yet a safety net

for your life I e In case you die which

unless you found the fountain of youth or a genie

in a lamp well it's gonna happen sometime with life

insurance There's the owner of the policy who is from

usually also the insured You know the person whose death

makes it rain money The person who would get that

money is the beneficiary And of course there's the insurer

the life insurance company who takes your money every month

They're also the ones that cough up a lot of

cash when you eventually bite the dust Well whole life

insurance hole there with a W is a type of

permanent life insurance That kind of investment E It's permanent

because it follows you for life like an insurance of

Grim Reaper you know always lurking in the shadows You

know whole life insurance was born from its mother term

life insurance and back in the day when life insurance

was just getting it start in life while term life

insurance was the only option Like you'd pay fifty seven

bucks for a month's worth of a million dollar life

insurance policy in your twenties if you didn't die that

month Well congratulations But then the insurance company kept all

the money you just gave them and then it would

start all over again the following month For the insured

life insurance can feel kind of like a lose lose

situation If you live well you're making payments that go

into an abyss and if you die while you're dead

But at least your kid or mom or whoever the

beneficiary is has some money Well life insurance buyers got

tired of this term life insurance gamble every month losing

all the money they gave to the insurance companies So

they began Teo What's called Oh yeah think And then

using the power of frighteningly large groups will they began

to invest the money into markets with like a thirty

year time horizon No more giving over of all that

fifty seven bucks every month to the insurance company watching

all the money go down the drain As you might

imagine the life insurance company's weren't very fund of people

getting smart on them investing their money for insurance instead

of dropping it into well you know the insurance black

hole So they decided to cut a deal with those

wanting to be insured They said We'LL cover you for

three months instead of one If you fall off a

bridge or get hit by a bus while your wife

and kids will be seeing a cool million dollars and

then they said will invest half of your monthly premium

in an index fund Yes we'LL even let you choose

which index fund we put it into and the other

half Well we get to keep And if you want

to back out and terminate the plan not because you're

in a wooden box but because you ran out of

money or moving or something Well you can keep eighty

percent of what's left in that pot Well this whole

structure for the revolved into what we have today whole

life insurance which covers you not for one month or

three but for life Remember it's permanent You could still

cancel payment or future payments but it would cost you

a pretty penny Whole life insurance includes building up savings

from part of your premium payments not watching all your

premiums go into the insurance black hole Since whole life

insurance is permanent it acts as a no touchy investment

account And because it has high fixed payouts when you

die well it's super expensive In essence Ah whole life

insurance plan is a tricycle style a handhold the investment

vehicle that tries to pull a Miley Cyrus right getting

the best of both worlds For those with the cash

and discipline and the ability Teo stay alive that we

watch out for that bus You can replace the need

to even have a whole life insurance policy by simply

buying your own shares of an index fund or mutual

fund all on your own with no insurance company middleman

taking a cut then you own one hundred percent of

the investment and all that's left to do after then

is you know not die for a decade or three

Enjoy your loot