Does a life insurance pay off more than a low-risk investment over your expected lifespan?
It pays off less.
The insurance companies actually take your premiums and put them into low-risk investment portfolios. The expected payout of the insurance policy is less than the expected value of the portfolio—that’s how insurance companies make a profit.
Also, insurance companies often front-load the premium payments relative to actuarial risk: at first you pay more than the actuarially fair amount, and less later. The insurance companies know that many people will eventually let the coverage drop due to financial trouble, error, etc so there is a cross-subsidy to those who make use of the whole policy (similar to the way one can get free loans from credit card companies by always paying the monthly bill, which the companies accept as a cost of acquiring customers who will take out high-interest balances).
This makes life insurance more desirable for someone unusually likely to keep the coverage for its whole term, and less so for the typical person.
Well, we’re talking about cryonicists, not typical people. Typical people might be better off with term insurance. Cryonicists might be better off with whole life insurance.
If an insurance company screws up and loses money on what it thought was a low-risk investment, is it still obligated to pay out your beneficiaries?
Do you believe you are less likely to screw up in this manner than a professional fund manager hired by a multi-million dollar company whose existence depends on accurate forecasts?
Will your heirs and/or creditors find it easier to grab your portfolio or an insurance policy of which they are neither the owners nor the beneficiaries?
If an insurance company screws up and loses money on what it thought was a low-risk investment, is it still obligated to pay out your beneficiaries?
Sure, but if it screws up in a sufficiently epic fashion it won’t have any money to pay to your beneficiaries.
Do you believe you are less likely to screw up in this manner than a professional fund manager hired by a multi-million dollar company whose existence depends on accurate forecasts?
Me? Why, yes, I do.
Will your heirs and/or creditors find it easier to grab your portfolio or an insurance policy of which they are neither the owners nor the beneficiaries?
I don’t know enough of bankruptcy/probate law to answer.
I might also point out that I had said nothing about the wisdom of buying term life insurance. I suspect that, as usual, it depends. For some people it’s a good deal, for others not so much.
It pays off less.
The insurance companies actually take your premiums and put them into low-risk investment portfolios. The expected payout of the insurance policy is less than the expected value of the portfolio—that’s how insurance companies make a profit.
Also, insurance companies often front-load the premium payments relative to actuarial risk: at first you pay more than the actuarially fair amount, and less later. The insurance companies know that many people will eventually let the coverage drop due to financial trouble, error, etc so there is a cross-subsidy to those who make use of the whole policy (similar to the way one can get free loans from credit card companies by always paying the monthly bill, which the companies accept as a cost of acquiring customers who will take out high-interest balances).
This makes life insurance more desirable for someone unusually likely to keep the coverage for its whole term, and less so for the typical person.
Well, we’re talking about cryonicists, not typical people. Typical people might be better off with term insurance. Cryonicists might be better off with whole life insurance.
Insurance is not an investment, it’s insurance.
Of course whether someone will actually keep the coverage for the whole term is uncertain and calculating a reasonable forecast seems rather hard.
If an insurance company screws up and loses money on what it thought was a low-risk investment, is it still obligated to pay out your beneficiaries?
Do you believe you are less likely to screw up in this manner than a professional fund manager hired by a multi-million dollar company whose existence depends on accurate forecasts?
Will your heirs and/or creditors find it easier to grab your portfolio or an insurance policy of which they are neither the owners nor the beneficiaries?
Sure, but if it screws up in a sufficiently epic fashion it won’t have any money to pay to your beneficiaries.
Me? Why, yes, I do.
I don’t know enough of bankruptcy/probate law to answer.
I might also point out that I had said nothing about the wisdom of buying term life insurance. I suspect that, as usual, it depends. For some people it’s a good deal, for others not so much.
That’s what I thought.