Some people think that they should own a whole life insurance policy, aka a permanent insurance policy because they are worried that they will lose the chance to be covered when the term is up. As a savy planner, you should be making calculated decisions about your financial future.
That is, when your life insurance term is up, you should be making plans to save enough money to cover the expenses needed. Suppose someone is retired and has no income, should that person have a life insurance policy? The answer is no because the purpose of insurance is to spread a risk to a larger group of people. In the case of life insurance, the risk is the loss of income if a person were to pass away. If they have no income, there is no financial risk. While the person's family may be affected emotionally, they will not be hurt financially.
According to www.investopedia.com, life insurance is: "A protection against the loss of income that would result if the insured passed away."
Do you agree that the purpose of a life insurance policy is to cover the risk of losing the income which would be generated by the insured person?
This post was reposted from http://finlit.biz/life-insurance/what-happens-when-your-life-insurance-term-is-up/, originally written on February 4th, 2013.
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