I have an extremely difficult time being OK with paying life insurance.
On the one hand, if I don’t pay for insurance my family will not be taken care of upon my departure from this planet. On the other hand, if I stick around like a bad smell, then all this cost is wasted, right?
I hate wasting money and that is why I have a hard time accepting this cost. I imagine this feeling will only get worse as I get older. If I get to age 65 for example, and no longer need life insurance, then I will have wasted over 30 years of money that I didn’t need to spend.
This feeling I am experiencing is known as the suck cost fallacy. It is when we continue to spend money on something, but refuse to cut our losses when we should. We continue to invest time and money into something even though we no longer need to.
Life insurance is a prime example. Many people may pay $100,000 or more towards their life insurance policies before they hit an age where they no longer need life insurance. But because we have put so much money in already, we feel like we have to keep going, even though premiums are getting more expensive as we age. We don’t want to feel like we have wasted all the previously spent money.
But you know what is more of a waste? Spending money on insurance when you no longer need to. Buying life insurance just because you have already put so much in is not a good reason to continue. Your need for life insurance should be decided on merit. Your decision to how much life insurance you need or don’t need, should be based on how well your current situation can provide for your future needs. Not on how much you have already put in.
To prevent this mindset that I have, I find that not thinking about this money as a waste helps. By having life insurance I am paying for the peace of mind that SHOULD anything happen to me, my family is taken care of. I should be happy that this money has been not been needed. It means i’m still alive!
Sunk cost is better than sunk dad.
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