Insurance, assurance . . .

Today, I sat down to ruminate over our new whole and term life insurance policies. After much thought and some careful (we thought) research, we chose to buy $100K of whole life and $500K of convertible term. The whole life comes with a guaranteed annual premium and will be completely paid up in 22 years. We will have contributed at that point $49,261 and the benefit amount will be $105,479 guaranteed. This insurance is for my partner T. and assures her that when she dies she will be leaving an inheritance to her son. The term life is also for her son and in her mind guarantees that if anything happens to her before the 20 years is up, her son will receive that death benefit, too. Originally, the plan was for T. to convert the term insurance gradually over to whole life so that sometime before the 20 years ran out she would have $600K of whole life insurance to pass on.

They say you buy insurance for one of two reasons: you love someone or you owe someone. They also say love can make you blind. I love my partner so I worked with her to set this up. But all the way through the process I knew that there were other choices that would provide the same thing and still let us be in better control. Once the insurance company has our money, the only way we can access it is through borrowing against the current cash value. At 8%. Of course the money we contribute is guaranteed to, at the least, double while it is in their care. And that is worth something. But the same $300 a month place in a 4% savings account will reach $168K over the same time period and we could use it if the need arose without any penalty. And if we put it in a long term investment fund like the Vanguard 500, the return might be 10% which would mean its value would compound to $268K. But in order for us to choose either of those two options we would need to have the assurance that our continually growing net worth would be the legacy that she would pass on to her son. Because that's the real key to deciding about whether to buy insurance, isn't it? Do you trust yourself or some insurance company?