BBCWatcher
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Sales nonsense aside, life insurance is very simple. Life insurance pays a benefit when the policyholder dies. The sole useful purpose it serves is to support ongoing lifestyles (food, housing, education, etc.) of dependents, at some hopefully "reasonable" level, if the policyholder cannot do so -- specifically because of his/her death. Most dead people do not generate incomes, and some don't have adequate wealth to support dependents that cannot support themselves, so that's why there's life insurance.
You do not need life insurance if you have no dependents. You do not need life insurance if household wealth can already support desired lifestyles for your dependents. You do not need life insurance if your dependents really aren't, i.e. they're already able to support their lifestyles.
Mick Jagger, for example, is well into his 70s and still fathering children. So he has dependents and keeps producing more of them. However, it's reasonable to assume that he can financially support a big village already, without insurance. He's a very wealthy man, already. So he doesn't need life insurance. (Whether an insurance salesperson sold him a life insurance policy is a separate question.) Dependents can also be any age. An elderly parent or grandparent might be your dependent, for example.
Life insurance is often combined with other types of insurance that are not life insurance in "hybrid" products. Those hybrid products might protect -- poorly, well, or somewhere in between -- against other risks besides death of the policyholder. As a notable example, disability income insurance pays a benefit if the policyholder becomes disabled (as the policy defines disability) and unable to work to generate an income. "Critical Illness" (CI) insurance pays a benefit if you happen to suffer from one of the ailments that's on the insurance company's list. If you suffer from some ailment not on the list, tough luck, even if your and your household's end result is exactly the same. "Accidental death" insurance pays a benefit if the policyholder dies due to a specific cause that's on a list, such as getting run over by a bus. If the policyholder dies as a result of a stroke, which might not be on the list, then tough luck.
I am not a fan of what I'd call "joke insurance," i.e. policies that have lots of weird exclusions. ("My husband is dead? Really? How did he die? A plane crash? YES! THANK GOD!" Weird!) Insurance really doesn't have to be complicated. Death is death, and inability to work (and generate an income) is inability to work. These concepts really aren't complicated, despite insurance companies' and salespersons' best efforts. Just pay attention to the outcomes you desire, and try to insure (if you need to) to assure those outcomes no matter what the risk mechanisms/pathways.
You do not need life insurance if you have no dependents. You do not need life insurance if household wealth can already support desired lifestyles for your dependents. You do not need life insurance if your dependents really aren't, i.e. they're already able to support their lifestyles.
Mick Jagger, for example, is well into his 70s and still fathering children. So he has dependents and keeps producing more of them. However, it's reasonable to assume that he can financially support a big village already, without insurance. He's a very wealthy man, already. So he doesn't need life insurance. (Whether an insurance salesperson sold him a life insurance policy is a separate question.) Dependents can also be any age. An elderly parent or grandparent might be your dependent, for example.
Life insurance is often combined with other types of insurance that are not life insurance in "hybrid" products. Those hybrid products might protect -- poorly, well, or somewhere in between -- against other risks besides death of the policyholder. As a notable example, disability income insurance pays a benefit if the policyholder becomes disabled (as the policy defines disability) and unable to work to generate an income. "Critical Illness" (CI) insurance pays a benefit if you happen to suffer from one of the ailments that's on the insurance company's list. If you suffer from some ailment not on the list, tough luck, even if your and your household's end result is exactly the same. "Accidental death" insurance pays a benefit if the policyholder dies due to a specific cause that's on a list, such as getting run over by a bus. If the policyholder dies as a result of a stroke, which might not be on the list, then tough luck.
I am not a fan of what I'd call "joke insurance," i.e. policies that have lots of weird exclusions. ("My husband is dead? Really? How did he die? A plane crash? YES! THANK GOD!" Weird!) Insurance really doesn't have to be complicated. Death is death, and inability to work (and generate an income) is inability to work. These concepts really aren't complicated, despite insurance companies' and salespersons' best efforts. Just pay attention to the outcomes you desire, and try to insure (if you need to) to assure those outcomes no matter what the risk mechanisms/pathways.
