Buying insurance is like placing a bet. You are the gambler and the insurance company is the casino. They take your money and if the event you are betting will happen actually does occur, the insurance company has to pay out the benefit.
With term life insurance, you are betting that you will die within the term of the policy. If you do, the death benefit paid is an amount vastly larger than the amount you wagered with your premium payments.
The chance that a term life insurance policy will have to pay a death benefit is only about ten percent. Most people will live longer than the term or let the policy lapse. Thus, the likelihood of your bet paying off is very low.
Still, it is a reasonable wager to make, both because it is the responsible thing to do to protect your family’s financial security, and because the amount you pay is so low compared to the potential death benefit.
Those who prefer more of a sure thing, might want to buy a term life policy with a Return of Premium (ROP) rider. If you buy a policy with this kind of option added and you live beyond the end of the term, the insurance company will give you back all the money you paid for the coverage.
You do pay extra for a Return of Premium rider, of course, but having a money back guarantee may be worth it.
While the Return of Premium rider significantly reduces your chances of losing the money you pay for the coverage, it does not eliminate the risk altogether. You could still lose your money by failing to keep up your premium payments. If the policy lapses, you forfeit the money you paid into the plan.
As with any gamble, you need to be comfortable that the amount you are betting on life insurance premiums is not going to disrupt your other financial obligations. Only commit yourself to payments that you are sure will be affordable both now and in the future.