The most common, and in my opinion the most reliably profitable, scams are, strictly speaking, not illegal. For the purpose of explaining how scams work in this thread, I not defining a SCAM as mere fraud.
Something as simple as fraud as defined by our over legal system is the simplest and least complicated type of scam. The world is full of legal scams. Faith healers for example. Companies that hide fraudulent medical advice and overbilling behind the veil of religious protections like a certain science fiction cult we all know.
The best scams are the one where you can take absolutely everything you can get from a person and nobody can stop you or get their money back because you have successfully exploited the US legal code to deliver way less than you thought you were paying money to get.
Life insurance is one such rip off.
By design, you don’t profit from it in any way at all ever. You are dead. You are not buying peace of mind, you are buying a lie.
Even your family barely profits at all. They do everything they can to avoid paying out.
Here is how life insurance companies even scam the families of dead soldiers.
TL;dr version: They deposit the money received to pay for the insurance into a 5% interest corporate saving account and then keep most of the insurance. Instead of keeping a small surcharge, they take almost all of the profits from the soldier’s investment. They are turning a massive profit on dead soldiers through a contractual government awarded monopoly and deceiving everyone about the nature of the product they are selling.
“Whole life” insurance is a scam.
In my opinion, even term life insurance is a massive rip off.
tl:dr version: Whole life insurance is an even bigger rip off than term life insurance because they are merely reinvesting what you pay them in publicly available instruments and paying you back less than half of the resulting profit when the insurance policy matures. You would have made way more money if you had just invested it yourself in the DOW index.
Insurance is always a bet against the house. They know when you’re going to die, and you don’t.
Whole Life policies will typically include a modest cash-out value. It probably will not be anywhere near what you put in, but it may soften the blow.
Regular (term life) policies are going to be based on the house odds. You’re betting that you will die, and they are betting that you won’t. When you understand that, you can be more realistic and frugal with your approach.
See, but it’s a bad trade. A stock portfolio pegged to a major index with any equivalent amount of deposits in it is a better deal mathematically speaking.
The whole damn industry is a big stupid fucking scam.
They are allowed to call this instrument “life” insurance but the name is very deceptive financially and furthermore they’re incentivized to hire investigators to find any legal loophole they can to avoid legitmate payment, and when it turns out they didn’t keep enough money on hand to cover insurance claims they’re allowed to delay payouts or go through torturous legal proceedings for people with solid claims to ditch them.
I briefly worked for an insurance company decades ago and I’ll never do that shit again. Sure, some people are crooks but there were far more people who got denied coverage through procedural wrangling than got denied for scamming.
If people want to make a nest egg for their families they’re better off in aggregate investing in sensible retirement solutions than anything called “life insurance”.
It should be called death insurance, to be sure.
