Since one thousand persons had bought the policy, they would pay 4.8 million in premium to the company. The insurance company has already calculated that approximately 31 (between the ages of 31 and 51) people with good health will die. So if 20 people pass away, the company will have to pay 20 x $ 200,000 or $ 4,000,000.
Therefore, if the company pays $ 4,000,000 and takes in $ 4,800,000, it will make a profit of $ 800,000. On the other hand, look at whole life insurance. We say that one thousand 31-year-olds (all in good health) purchased the aforementioned whole life policy ($ 200,000 dollars $ 100 / month). These people are paying $ 100 / month. It is $ 1200 per year. If the average person’s lifetime (among those in good health) becomes 75, then the average person will pay a premium of 44 years.
If you take it and multiply it by $ 1200 you will get $ 52,800. Therefore each person will pay $ 52,800 over the life of the policy. Since one thousand persons had bought the policy, they would pay 52.8 million in premium to the company. If you buy a whole life policy, the insurance company has already calculated the probability that you will die. What is that probability? 100%, because this is a whole life (part us till death) insurance policy! This means that if everyone kept their policies, the insurance company would have to pay 1000 x $ 200,000 = $ 2,000,000,000) That’s right, two billion dollars! Tell me what is the principle of decreasing responsibility, and perhaps we can answer this question. Suppose you and your husband have just married and have a child. Like most people, they are also crazy when they are young, so they go out and buy a new car and a new house. Now, here you are with a small child and there is debt to the neck! In this particular case,
if one of you passed away, the loss of income would be disastrous for the other husband and child. It is a matter of life insurance. But, this is what happens. You and your husband start repaying that debt. Your child is older and less dependent on you. You start building your wealth. Keep in mind that I am talking about real property, not fake or phantom property such as equity in a house (which is just a fixed interest rate credit card) so you see, even if there are lots of new variations throughout life Are, such as variable life and universal life, with various bells and whistles (claiming to be superior to the original, specific whole life policies),
red pill questions should always be asked A! If you are going to buy insurance, buy insurance! If you are going to invest, invest. It is so easy. Do not let an insurance agent buy an entire life policy based on the belief that you are too incompetent and undisciplined to invest your money. This is another reason