Reasons Not To Buy Life Insurance

Depending on what you read and with whom you speak, you may hear many other reasons to buy insurance. Here are some that we think are a real "stretch": "Protect your children with life insurance"...We all want to protect those we love. But life insurance bought on a child doesn't protect them, it protects you. Unless your child is a major breadwinner, the insurance only protects you from the cost of a funeral. Speaking purely in rational, financial terms, most households can afford to bear this cost out of savings... insurance is not needed. "Give your child the gift of life insurance to get him or her started on the way to financial responsibility, and to protect their ability to get life insurance later in life, should something happen to their health"...While it is technically possible that a child may develop a serious illness which could lead to insuring problems in the future, it is rare that this occurs. And of those who do survive such an illness, most are insurable if they make it to adulthood. You would probably make a much more valuable gift if instead you invested the amount you would have paid in premiums rather than paying it to an insurance company. "Life insurance is a good way to save money for a rainy day"...True, if you buy cash value life insurance (also called "permanent insurance"...whole life, universal life), money that goes into a cash value account does grow without being taxed; however, only a portion of what you pay into a policy goes into the cash value account. So, while the rates of interest you may see illustrated appear to be higher than some investments, you need to remember that this rate is only applied to part of your contribution. Generally speaking, if what you want to do is grow your money, an investment is a better investment. "Life insurance is a good way to force yourself to save"...If you have trouble saving money each month, what makes you think you would continue to pay premiums for insurance you don't really need? Instead, you could set up regular automatic direct checking account deductions with a mutual fund that will invest your money for better returns.