by jilm

Created on: December 16, 2009

In a life insurance policy "Benefits" are only paid when the insured dies so the wording of this question is a little skewed.  Unless you pay more in premiums than the face value of your policy at the time of the insureds death, then yes, the benefits are worth it.  It should probably read, "Is the protection life insurance offers worth the high premiums".

That said, without going into the difference between term life, whole life, variable life, universal life, etc. it depends what "high premium" entails as this is relative to each individual.  It also depends on who you ask; Ask someone who's filed a claim on a policy because the insured has died and they'll most likely have an affirmative answer.  Although I've never encountered a person who's mentioned how they wasted money on life insurance because they didn't die that year, I have spoke with people who were paying for coverage when their only beneficiary was their estate.

I'm also assuming this is referring to an individual policy and not a key person policy, cross purchase agreement, etc.  Therefor the purpose of having an insurance policy on someone who brings in the money is pretty simple: replace the income that they provided.  It's not to make your family rich if you get run down on the highway nor is it putting a bounty on your head.  But just like any other financial transaction there is a difference between executing a well thought out plan and a reckless 'shoot from the hip' plan.  Trying to use a life insurance policy for something its not intended for will probably yield unintended results.  Buying a whole life or variable life policy as an investment vehicle for a young working couple may not be appropriate, however a wealthy person who wants to purchase a single premium whole life policy to protect their estate might be suitable. 

As there is no magic bullet to determine what type or amount of life insurance is appropriate, nor is there a crystal ball to know when the inevitable will occur, the concept of financial risk transfer and asset protection is still sound.   While statistically speaking there is a 100% chance you will die sometime in your life,  financially speaking life insurance is merely a means to hedge your bets with fate.

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