Many people regard life insurance as a grudge purchase. Something they have to buy, not something they want to buy. This is exactly the wrong way to think about things. After all, how many things do you buy and hope you never use?
Imagine yourself at the races. You study the field, choose your horse and then place your bet. And then you hope that your horse runs stone cold last!
“Slow down, Wynxie! Let someone else finish first today.”
Sound crazy? Well, if you’re betting on horses, it is. But there are other kinds of ‘bet’ where this is exactly what you want to happen. You want to come last. You want to do your dough.
Those bets are also known as ‘life insurances.’
Some people call life insurance a ‘grudge purchase:’ something you buy even though you do not really want it. They see it like laying a bet that you want to lose. That is absolutely the wrong way to think about things. If we continue the betting analogy: insurance is like backing a horse in a horse race – and knowing that every outcome will be a good one. In fact, the best possible outcome would be if your horse ran last (or, that you stay healthy and never make a claim).
Insurance is a ‘bet’ that you cannot really lose. When you take out a life insurance policy, you’re hoping you never make a claim. You’re hoping that you’ll get to the end of your life and the amounts that you have spent on premiums will have been unnecessary. If that’s the case, this is wonderful news – you stayed alive, you never got so sick you needed to make a claim and you happily banked your entire working life’s earnings. These earnings are substantial. A person earning average wages across a 40 year career will bank about $3.3 million, including superannuation (in today’s dollars).
So, if you lose your bet you end up with $3.3 million that you earned yourself. How good is that?
But what if you don’t lose your ‘bet’ and you do get sick or die? Well, life insurance means you still win – at least financially. You get back more from the insurer than you paid in premiums. You or your loved ones do not suffer financially even while you suffer physically.
That’s why insurance should never be a ‘grudge purchase.’ It is actually one of the few things in life that represents a genuine ‘cannot fail’ situation. You win if you make a claim – and you win even more if you don’t make a claim.
Imagine how much more fun you would have at the races if you win more by backing the slowest horse. Now imagine how much more pleasant life becomes when losing makes you happier than winning!
So, insure yourself, and relax. Let’s hope you lose.