Insurance companies take in more in premiums than they pay out in benefits, so on average, not worth it. However it can nevertheless be useful in certain circumstances. I'd recommend it (and disability insurance for the same reasons) if:
- People are financially dependent on your wages
- You love them enough to not want them to resort to gofundme to pay off the mortgage
- They aren't just going to become e-beggars anyway so they can blow the insurance payout on drugs instead of on their house, and
- Your death is unlikely to be at the hands of your beneficiaries (even if they know about your policy)
Just stay the hell away from the children's policies offered by companies like Gerber. Those are complete ripoffs, which is why they're often marketed as "grandchildren policies" to the elderly who might not have noticed how much childhood mortality has dropped since their little brother died of polio in 1940.
Of course insurance companies take in more premiums than they pay out in death benefit. How else would they survive as a company if their expenses were greater than their revenues?
They have to take those premiums and put them to work in relatively safe investments in order to be able to pay out the death benefit when the time comes.
This is true for whole life, which will always be paid so long as the policyholder doesn't let the policy lapse.
Term insurance doesn't pay out something like 97% of the time because the policy usually expires before the insured dies, so unless you are buying long-dated convertible term, it's generally not really worth it.
Grandchildren whole life policies are great once you have purchased a substantial amount of whole life on yourself, your spouse, and your own kids. They obviously won't have a large death benefit but the amount of death benefit you get per dollar of premium is huge, because children are at the lowest risk of dying. So you can start building capital for a child very early in their life and then gift them the policy when they come of age so that they will have an asset that they can use to finance the purchase of a car or school tuition or down payment on a house or whatever else.
And obviously stock life insurance companies are inferior to mutual life companies and stock companies should be avoided completely.
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