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Finance allah shmoop What is life insurance Term versus variable

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The smackdown and there's A reason that warren buffett is

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one of the wealthiest men in the world He sells

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insurance great industry great profits usually And great record of

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no complaints from the dead Let's Start with term life

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insurance The easiest kind of insurance on the planet tau

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understand Meet don vannucci He has a wife and two

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new kids Twins babies Same hairstyle is their dad Don

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is a contract assassin with the nsa as a big

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client And he knows that one day there probably is

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a bullet with his name on it Or worse So

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he buys for fifty bucks a month Term life insurance

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which pays his wife three hundred grand if he dies

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pretty much for any reason Unless she is the one

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who kills him and that can be proved in a

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court of law And well you know with his snoring

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and you never know You know i've been there So

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a month goes by He pays the fifty bucks term

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life insurance and does not die So what happens Well

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the insurance company keeps all the money and yes there

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Were brokerage fees in here but they're relatively small for

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this very competitive easy to understand kind of insurance Well

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the year goes by in twelve payments of fifty bucks

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or six hundred dollars He's not dead yet and the

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insurance company keeps all the dough Yeah huge profit margins

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And in fact with don at thirty two years old

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well in any normal career like you know being a

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dia trist or a stockbroker realtor something like that his

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life expectancy would be for some fifty more years or

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more than that of paying that term life policy So

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if he lives that fifty years while that would be

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six hundred payments at fifty bucks a month for a

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very long time with then escalating payments as he gets

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older and you know more likely to die that month

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Well the key determining feature in term life however is

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that should don ever stop paying his monthly premiums because

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he chose not to not because he is dead Then

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the policy is just cancelled all of those previous payments

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which he could have invested in the stock market and

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let compound away growing it in his percent a year

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Well they're all owned by the insurance company which took

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his six hundred dollars a year each year for decades

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and grew it to be worth hundreds of thousands of

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dollars by investing it But since don didn't do that

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in all fairness at thirty two it didn't seem like

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he'd last all that long especially having been given the

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afghanistan well then he loses all his back payments when

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he cancels at age seventy two just in time for

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the assassin who's been contract id to take him out

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you know finds him so that's term life terminal life

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All right well then what's variable life Well variable life

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views that fifty bucks a month in payment as a

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kind of sort of investment albeit not necessarily a great

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one Had don gotten a variable life policy instead of

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a term life policy and then paid into it for

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forty or fifty years and then stopped Well he might

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have accumulated cash surrender value of some forty fifty sixty

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grand or so that is he would have assumed some

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market risk as the insurance company invested the money and

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he would have at least gotten back some of his

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hard earned after tax dough that he invested for so

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many years between you know assignments A shame Never heard 00:03:33.47 --> [endTime] the big guy coming

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