Bad Faith Insurance

Finance allah shmoop What is life insurance Term versus variable

The smackdown and there's A reason that warren buffett is

one of the wealthiest men in the world He sells

insurance great industry great profits usually And great record of

no complaints from the dead Let's Start with term life

insurance The easiest kind of insurance on the planet tau

understand Meet don vannucci He has a wife and two

new kids Twins babies Same hairstyle is their dad Don

is a contract assassin with the nsa as a big

client And he knows that one day there probably is

a bullet with his name on it Or worse So

he buys for fifty bucks a month Term life insurance

which pays his wife three hundred grand if he dies

pretty much for any reason Unless she is the one

who kills him and that can be proved in a

court of law And well you know with his snoring

and you never know You know i've been there So

a month goes by He pays the fifty bucks term

life insurance and does not die So what happens Well

the insurance company keeps all the money and yes there

Were brokerage fees in here but they're relatively small for

this very competitive easy to understand kind of insurance Well

the year goes by in twelve payments of fifty bucks

or six hundred dollars He's not dead yet and the

insurance company keeps all the dough Yeah huge profit margins

And in fact with don at thirty two years old

well in any normal career like you know being a

dia trist or a stockbroker realtor something like that his

life expectancy would be for some fifty more years or

more than that of paying that term life policy So

if he lives that fifty years while that would be

six hundred payments at fifty bucks a month for a

very long time with then escalating payments as he gets

older and you know more likely to die that month

Well the key determining feature in term life however is

that should don ever stop paying his monthly premiums because

he chose not to not because he is dead Then

the policy is just cancelled all of those previous payments

which he could have invested in the stock market and

let compound away growing it in his percent a year

Well they're all owned by the insurance company which took

his six hundred dollars a year each year for decades

and grew it to be worth hundreds of thousands of

dollars by investing it But since don didn't do that

in all fairness at thirty two it didn't seem like

he'd last all that long especially having been given the

afghanistan well then he loses all his back payments when

he cancels at age seventy two just in time for

the assassin who's been contract id to take him out

you know finds him so that's term life terminal life

All right well then what's variable life Well variable life

views that fifty bucks a month in payment as a

kind of sort of investment albeit not necessarily a great

one Had don gotten a variable life policy instead of

a term life policy and then paid into it for

forty or fifty years and then stopped Well he might

have accumulated cash surrender value of some forty fifty sixty

grand or so that is he would have assumed some

market risk as the insurance company invested the money and

he would have at least gotten back some of his

hard earned after tax dough that he invested for so

many years between you know assignments A shame Never heard 00:03:33.47 --> [endTime] the big guy coming