Why is it Life Insurance?
By Arnold Kling
I claimed that if an event is very likely to happen, then it is not insurable. Some commenters responded that we have life insurance, and yet everybody dies.
The reason that we can have life insurance is that the timing of death is unknown. If you were known to have exactly two years to live, then you could not obtain life insurance.
If I am 50 years old and my family depends on my salary for its well-being, then I might buy life insurance. That way, in the unlikely even that I die before age 65, my family will be provided for. The insurable event is not my death per se. It is my death at an early age.
What that suggests is that life insurance policies should expire about the time that you quit work (you can do this with term life insurance). Beyond that, it just becomes a form of (tax-advantaged) saving that only benefits the purchaser to the extent that the tax savings make up for what the life insurance company chews up in administrative costs and profits. Given that there are other tax-advantaged long-term savings options available, I think that the case for buying life insurance that goes beyond the point of retirement is pretty flimsy.