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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: WSJ: Longevity Insurance Date: 11/21/2011 7:23 PM
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I hear that sort of comment a lot and it puzzles me. No one says "If you have good reason to think your house is going to burn down, fire insurance might be a reasonable bet." So, why only buy longevity insurance if you think you are very likely to live long? If the subject were fire insurance, would you post a link to a company that tests how combustible your house is? I thought the point of insurance was to cover low-probability, high-cost contingencies. Doesn't living to 100 fit that description?

You might live long, and it you do, you'll need more money than if you don't. You have 3 choices: 1) Don't provide for your financial needs after some age you pick as your probable death date, let's say 85 2) Save money to support yourself after age 85, which means if you die before 85 that money is wasted, or 3) buy longevity insurance, which means if you don't live past 85 that premium is wasted. Since the cost of longevity insurance is less than you would have to save to meet your post-age-85 needs, it's the most efficient way to cover the risk of living past 85. So, why is it considered "expensive?"
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