Life vs. Health Insurance

The other day I was looking at my auto insurance bill and noticed that it was bundled with my home insurance. In fact, I received a modest discount for this loyalty. Then it made me think. Why can’t I bundle my life and health insurance policies for a similar discount? After all, I would be insuring the same body.

Wouldn’t both a life and a health insurance company have the same common interest for me to stay healthy? Then it hit me. It costs health insurance companies money to keep me healthy. The morbid fact is that, in some cases, keeping an insured person alive will increase a health insurance company’s cost and reduce a life insurance company’s cost at the same time.

The fact of the matter is that when you buy a health insurance policy, you are betting on yourself getting sick during the term of the policy. The same applies to life insurance. The insurance companies are betting on the opposite. The spread is your premium.

So, the insurance companies are kind of like the house in Vegas. As the risk for your getting sick increases, so do your health insurance premiums, deductibles, and other out-of-pocket expenses. As for your life insurance policy, the term ends prior to your risk of death becoming unpalatable to the insurance company. The house always wins.