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"Why rent when you can buy?" earns a Flowers vs. Turds rating of...
Founder & CEO

4 turds - total BS.

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Seriously, don't ever buy a life insurance policy because someone said, "why rent when you can buy?"

This line is often used to discourage people from buying term insurance (pays a benefit if you die during a specified time period, often 20 or 30 years) and sell them on buying permanent life insurance, which is much more expensive (pays a benefit whenever you die, often called "whole life", "universal life", etc.).

"Why rent when you can buy?" misses the fact that you're not "renting" anything with term life insurance - you're buying protection against a very bad event that's unlikely to happen, but would be devastating if it did.

That "very bad event" is you dying at a time in life when your loved ones' well-being depends on your income or care you provide for free.

Consider an analogy to homeowner's insurance: would you say you're "renting" homeowner's insurance?

No. Of course not. With homeowner's insurance, you are buying protection against the possibility of a very bad event, one that would be devastating if it did occur.

Would you feel like you didn't get your money's worth from your homeowner's insurance unless a hurricane destroys your home?

No. Of course not. You hope that catastrophe does not strike. The insurance is just there for protection if it does.

Same deal with term life insurance: you buy it because you hope you won't need it, but you want the protection for your loved ones if disaster does strike and you are gone much sooner than expected, leaving them without your income and care.

Term insurance is so much less expensive than permanent insurance precisely because the odds are good that you will outlive the term. And that is great news! No hurricanes, no premature deaths - that's a future we all hope for.

Unfortunately we know that not everyone gets that future. That's why insurance is necessary.

This is not to say that permanent life insurance (lasts your entire life) is never appropriate - sometimes it certainly is - but, when it is right, it's not because of some total BS "why rent when you can buy" sales line. We'll save when permanent life insurance is appropriate for another post.

The worst part of this sales line is that it results in dangerously low levels of coverage. Because even the least expensive type of permanent insurance can easily be 6x as expensive as term, some people end up paying a lot of money for an amount of coverage that is nowhere close to enough. This is particularly heart-breaking because these people were trying to do the right thing, they just got terrible "advice". The good news is that there's always a way out of such situations, the mistake can be fixed.

For people who like the idea of having permanent life insurance coverage, but do not want to devote too much money to life insurance today, we recommend choosing a term policy with an excellent conversion option (the right to convert from term to permanent later in life, without proving your insurability). Don't let anyone tell you all conversion options are the same (they're not - you can learn more about that here).

And visit our life insurance calculator to get personalized recommendations for the life insurance coverage that makes sense for you.

Curious to learn more about the AboveBoard Flowers vs. Turds Rating System? Check this post out.

Wallis is the Founder & CEO of AboveBoard Financial, a company reinventing investment advice and insurance with revolutionary transparency and honesty. Wallis spent over 10 years at Goldman Sachs as an investment banker and hedge fund investor in financial institutions. She founded AboveBoard to cut through the BS and present important choices with clarity and compassion. Wallis lives in New York City with her husband and two young children.