No, seriously, do you really need Life Insurance or not?
Last week I had an interesting conversation with the fellow FIRE blogger – Financial Patriot Blog who wrote on Twitter that he and his family don’t buy Life Insurance
Why we never bought life insurance:
On average, a life insurance company may expect to pay out a death claim on a term life policy for about 1 out of every 100 people insured.
— Finance Patriot Blog (@financepatblog) December 26, 2017
He’s absolutely right. Statistically speaking probability of using life insurance benefits is almost zero; it’s less than 1%
But it’s not so simple.
Insurance in Soviet Russia
Insurance business in Soviet Russia was the government prerogative. There was only one company called Rossgosstrakh which had about 140,000 insurance agents all over the country.
In early 80x, the insurance market in USSR was about 161B Soviet rubles, which is about $550B. But the way the whole market was structured and gained was typical for USSR.
Every Soviet citizen was a government employee, because every organization, factory or a service “company” was the government property. People didn’t have any small business it was criminal activity.
From every paycheck, you would have some mandatory withdrawals. Your trade union had to decide what type of withdrawals (in addition to the taxes) you would have.
My father, who was a coal miner, had these:
- life insurance
- health insurance
- disability insurance
- trade union fees
Because of these additional mandatory withdrawals, people didn’t like insurance at all, a lot of people used to think that this is unnecessary crap that they have to buy because the government said so.
As a result, I grew up with an impression that all insurance business is a scam.
After our immigration to the States in 2013, I realized one simple thing. It was a revelation to me. We don’t have anyone here.
That was a really hard thing to grasp before the immigration, I know.