Is Life Insurance a Scam?

Did you know that the birth of life insurance can be traced all the way back to ancient Rome? The Romans had beliefs that if anyone who passed away wasn’t buried properly, they would turn into an “unhappy ghost.” So, they created a form of burial insurance to ensure that families can take care of their loved ones who have passed on. 

By the 1930s in the United States, after World War I, there was a life insurance policy for every man, woman, and child. Roughly 120 million policies. During these times, most Americans were working in higher risk, blue-collar jobs, which was the driving force that caused America to invest their money into insurance policies.

Now, in 2020, the biggest risk most of us face on daily basis is catching COVID-19, but when it comes to facing danger at our jobs, this is definitely not the case.

So the question is, is it worth it to buy life insurance?

Dave Ramsey says that he never recommends purchasing Life Insurance as an investment vehicle, but if you need life insurance, he recommends that you purchase term insurance.

Term-Insurance is a form of life insurance that allows you to pay for insurance over a specified time, just in case you get hit by a bus or shot by a bazooka. After the time period is up, you no longer need to pay for the insurance and you’re no longer covered!

Recently, I decided to do an experiment with regards to purchasing a $1 Million insurance policy for myself. The numbers I found were eye-opening. I’m not sure if I consider myself lucky or unlucky to be a numbers person, but I know that numbers scare a lot of you. So, I decided to crunch the numbers for you so that I can educate you in regards to purchasing life insurance.

Here’s what I found.

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This example is showing if I started paying $639.17 each month, I will have $685,063 by the time I turn 69 years old.

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This illustration is saying if I pay the $639.17 each month, you will have paid $268,450 into your insurance plan, giving you an accumulated value of $523,893. When I ran the numbers if you were to put $639.17/month into an investment, from age 30 to 65, in order to reach $523,893, you would have to have an investment return of about 3.468%.

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This is a different illustration showing the same thing as above. Put $639.17 away each month, by the age of 65, you will have $523,893. Sounds pretty good right?

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Here, you are shown exactly what you’re paying for your insurance plan. In the first year, the total cost of your life insurance is $3107.

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By the time, you reach age 62 or year 32 with the insurance plan. You’re going to be paying $6649 in expenses for your insurance. Overall, from age 30 to age 65, you will have paid a total of $159,207 in expenses for your life insurance.

$159,207 in expenses in order to receive an investment return of around 3.468%.

In my opinion, this doesn’t sound like a good deal to me…

Your Guide,

Joshua Krafchick, AKA “CHACHI”

Additional reading to learn more about Insurance.

  1. Health Insurance Is Boring As %&*$
  2. What Life Insurance Companies Don’t Want You To Know.


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