Quote:
Originally Posted by pseudoreality
I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.
Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.
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I sorta get where you're coming from, but I also don't think you're understanding the context for which life insurance can come into play. Life insurance is but one facet of both long term planning as well as financial planning.
Buying life insurance doesn't mean you don't put any money into investing. Term life insurance in the most unfortunate circumstances gives a return not comparable to any conventional investment methods both in percentage of gains and the fact it's tax free. That's not even discussing its other abilities such as bypassing an estate freeze if set up in a certain way. The funny thing is, is that you mention diversification. Whole insurance is actually a way to diversify.
Ignoring whole life insurance, term life insurance IMO can be viewed in two ways. One, making one of the riskiest bets on the stock market you can ever make. You lose all your money for that one small chance to make it big when it is needed most. Or two, paying someone to get peace of mind. In some senses, based on the crime rates in Canada, IMO like paying an alarm company or travel insurance. Money down the toilet if nothing happens, but worth more than the money paid by a super huge margin if something does happen.
Furthermore, term life insurance can be purchased during the period of time when you are highest in debt, like having a mortgage. Things happen and you don't want your family to be left holding the bag, do you? Lose you AND lose the place where they made happy memories with you? Nah. Once you pay off the debt and have it "in check" then stop the term insurance and enjoy that extra cash again.
Another argument I have with people is that they think it's the worst waste of money ever because they won't be around to receive the funds. Life insurance in some senses (whole life for me anyways) is about betting I will live longer than the statistical models say. If I kick the bucket earlier, I still get far more money than I pay in. But that money isn't for me. It's a legacy fund. Although I believe my broker told me I can rack up all sorts of debt and expect my policy to pay for it...
I understand the confusion though. Term and whole insurance in many instances are as opposite in terms of their financial uses as can be. The only time they actually seem to be similar is when acquiring term insurance to go with your whole insurance because your mortgage isn't covered completely by whole insurance (if you have it).
I have whole life insurance. My parents felt I had too much cash after starting work and set me up with a broker to "use up my cash". I thought it was dumb, but did it anyways and I'm glad I did. It's a medium that sucked up my cash and forced me to "save". My guaranteed cash value and paid up value begin accumulating this year. It's very fascinating stuff (
insurance fascinating?). I mean hours of self research doesn't bet hours of conversation with someone in the know.
TL;DR I think you have some good financial habits. I think if you spend time to sit down with someone knowledgeable like Slava and learn about insurance, you might be able to further diversify yourself in your finances.