09/25/2025
I often warn consumers of the dangers of being sold on a permanent life insurance policy. Instead I recommend buying a term policy that covers you long enough for your dependents to be grown.
When I make these posts, I invariably have life insurance salesmen blow up my comments with a statement like this (emphasis my own):
BUT JEREMY YOU BIG DUMDUM, WHAT WILL YOU DO WHEN YOUR TERM POLICY EXPIRES?! YOU’LL BE LEFT WITH NOTHING AND YOU WASTED ALL THAT MONEY BECAUSE 98% OF TERM POLICIES NEVER PAY OUT YOU BIG FAT POO POO FACE.
Whoa there man. First, cool it with the name calling. Let me break down this argument:
1.) 98% of term policies don’t pay out. Yeah, that’s the dream. I certainly want to be in that 98% of customers who don’t die. And if I DO die young, I’ll be glad to have an insurance policy that pays out.
2.) You’ll be left with nothing. This is the insurance salesmen’s mindset. The only way to leave anything to your children is by dying and having your insurance pay out. But there’s something else you can leave your children: MONEY. The money you didn’t spend on insurance. The nice thing about money is you don’t even need to be dead to use it.
So what’s happening here? The dirty little secret of permanent life insurance is that it’s WAY MORE EXPENSIVE than term insurance. I went to Policygenius.com to get their average of current rates. I did an apples to apples comparison of a 30 year old buying 30 year term vs whole life. The 30 year term policy is $42/month. The whole life policy is $408/month. That’s almost TEN TIMES MORE. That means if you buy the $42 option, you have $365/month left to INVEST. That’s why the green line grows every year. When the term policy ends and the term death benefit goes to zero, you see the line drop, but your family still gets WAY MORE THAN $500,000 because you’ve been investing the difference for 30 years!
So no, don’t let life insurance be your investment strategy. Buy the term policy you need, invest the rest.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
