Why 'Throwing Your Money Away' on Life Insurance Is Actually a Good Thing

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  • Some people might make the argument that life insurance is a waste of money.
  • If you buy life insurance and never use it, that's actually a very good thing.
  • If you don't use your life insurance, it means you haven't passed away unexpectedly, but you did gain peace of mind for the coverage period.

Life insurance is something you should hope to pay for and never use.

There are certain expenses in life that we all have to pay for. We all need housing, a way to get to work or around town, food, and medication. Plus, we need a way to communicate with others (enter cellphones), electricity, water, and heat.

Most people wouldn't hesitate to label all of these expenses as "essential." But what about life insurance? Some folks might say that it's a waste of money -- especially if you don't end up getting any use out of it. But actually, paying for life insurance and never having your policy pay out any money is a really great thing.

Something you pay for and hope to never use

There are certain types of insurance you can plan or hope to use, and certain types you hope you'll never have to. Health insurance falls into the former category. Presenting your health insurance card at a doctor's office could mean getting free preventive care, or getting treatment for an illness or injury at a much lower cost than you'd get stuck with in the absence of insurance.

Meanwhile, car insurance is the type of coverage you might hope to never use. If you're forced to file a claim against your auto insurance policy, it means you've been in an accident or had your vehicle sustain damage, which clearly isn't what you want. Rather, you'd probably prefer to have car insurance but never actually have a need to file a claim against it.

Life insurance works similarly. Let's say you're 35 and you buy a term life insurance policy (which is generally a far more cost-effective means of securing coverage than a whole life policy) that gives you coverage for 30 years. If you make it to your 65th birthday, you can argue that you just "threw away" money on 30 years' worth of premiums. But guess what? You also got to remain on this planet as a living human. So that's hardly something to be aggravated about.

In fact, your whole intent in buying life insurance should be to hope it never gets used. But just as you never know when you might get into a fender bender on the road, you never know when you might pass away unexpectedly. And just as you wouldn't want to get stuck with thousands of dollars in car repair costs following an accident, so too would you not want to leave your loved ones to struggle financially in the event of your untimely passing.

A worthwhile expense, even if it amounts to nothing

You may not end up getting your money back, so to speak, when you pay for life insurance. But what you will get is peace of mind -- for yourself and the people in your life who depend on you financially. And for that reason alone, it's worth buying coverage. And it's also worth thanking your lucky stars if you reach the end of your policy's term without having received a payout from your life insurance company.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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