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Life Insurance or Death Insurance?

  • Feb-14-2012
  • Richard Reich

Having been in the life insurance business for as long as I have, I have often wondered why it is called life insurance rather than death insurance.  After all, you can purchase Accidental Death insurance, you can buy Accidental Death and Dismemberment insurance, but when you purchase a policy to pay your beneficiaries in the event of your death, you buy Life Insurance.

In many of the promotional materials I read aboutlife insurance, it’s rare to read about the Death Benefit.  You don’t often see the words Death, Dying, or other words signifying the end of life.  After all, who (other than casket manufacturers and undertakers) want to talk about death?

In the early days of life insurance, there was a method of selling the product which was often called, “backing the hearse up to the door.”  With this method, the agent would paint a picture to the wife of the prospect of funerals, of life without a partner, of children running around without shoes, etc.  While I don’t, for a minute, want to degrade the wonderful uses of life insurance, I have never been a fan of that type of sale.

Life insurance really is death insurance, as it pays a benefit at the death of the insured, but it would be tough to start conversations by saying, “let’s talk about your death.”  It’s not a subject I like to talk about too much, so I understand the insurance industry’s use of the label “Life Insurance.”

There are living benefits to be had with permanent life insurance policies, such as Whole Life Insurance.  With a cash-value build-up, there are living benefits, such as having enough funds for retirement, college funds for the children, or cash to use as you wish – like take that trip to Europe that you never got around to doing.  Even though there is a death benefit, I can see calling this life insurance.

Term life insurance, on the other hand, without any cash-value component like it’s whole life cousin, is really pure death insurance.  There are no living benefits, unless you consider that there are living benefits in knowing that your family will be able to continue living in the lifestyle you set up for them.

Come to think of it, the naming of this insurance product isn’t much different than other types of policies most people purchase – auto insurance and homeowner’s insurance.  After all, we don’t call them “car crash insurance” and “your home is damaged by a fire” insurance.”  We do, however, purchase flood insurance and earthquake insurance (at least in California).

 Call it life insurance or death insurance, whether you purchase term or whole life insurance, if you are married and have a family. you should have an adequate amount of death benefit (yes, I know, I said it).  At LifeInsure.com, we can help you find and apply for the right type of policy for you and your family…and we promise not to back the hearse up to the door.

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