I hate life insurance

Odds & Ends Written by John Bolton, Aug 2 2009

I have a love-hate relationship with life insurance. (When I refer to life insurance I mean all of the health-related insurances: life cover, trauma cover, income protection, mortgage protection and medical insurance.)

Things I hate about life insurance

Like you, I hate paying for something I have no intention of ever using! When we buy life insurance it often feels like we've had a sales job done on us. There is nothing worse than buying something you don't need – it’s almost up there with infomercials. And let’s be honest - sometimes we really have had a sales job done on us! Are you a habitual buyer of things you don't need? If you have credit card repayment insurance, or have paid for some obscure accidental death cover that came in the post, or have bought any insurance over the phone, then you need to review your insurances. (These products are all crap!) Actually, while we're talking about it, I also get annoyed by people ringing me up and trying to sell me life insurance over the phone. When we do mortgage reviews we also take the opportunity to review your life insurance. I've been surprised by the number of clients that (1) don't know what insurance they are paying for and (2) have been talked into every "up-sell" imaginable. If you don't know what cover you've got, then you need a review.

Things I love about life insurance

At the other end of the spectrum, I love life insurance because when things do go wrong it makes such a huge difference. If your world has just been blown apart, the last thing you want to worry about is money! I've mostly lost my invincibility hormones (except when driving or playing sport.) Too many people I know have hit with cancer, and it scares the crap out of me. On the other hand, I can now rationally value my life insurance, and for me it equates to $320 per month (have just reviewed my cover.) That probably seems a tad high, but bear in mind I own a business.

Russian roulette

As a young person it is easy to think "I'm healthy ... I'll get life insurance when I need it." Nothing is wrong with this as long as you accept that this is analogous to Russian roulette, because everything is just fine until suddenly it isn’t, and at that point it’s too late to do anything about it. You will not be able to get life insurance cover for any related illnesses for the rest of your life. Deferring life insurance is a calculated guess that you'll end up getting insurance at the right time, logically just before something goes wrong.  Hey that's cool - just make sure you don't get your timing wrong! Also remember that life insurance is cheap when you're young and healthy precisely because the risks are low.

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