Every here and there I hear about the following investment option: There's an insurance company that is willing to take my money and hold it for some very long time (like 5 years or more) and then repay it together with some rather conservative investment income.
I don't get one thing. Insuring is done against a specific risk. For example, I can insure my apartment against being destroyed. The apartment maybe gets destroyed, but that's rather unlikely. The point here is that I see such destruction as negative and am willing to pay for the policy to be protected against the risk. The insurance company will also see that event as negative - if something happens they have to pay. And again, the event is likely to not happen.
Meanwhile the above-mentioned option includes the policy according to which the lump sum is repaid in cases of either
- I survive and live up to the policy term end or
- I die prematurely before the term ends
and points 1 and 2 are both called risks. What puzzles me is that they are mutually exclusive and either will surely happen.
For example, if I buy such investment now for 5 years then in 5 years I'm either dead or alive and the insurance company has to pay. So yes, it can be called risk, but this risk will happen for sure. I can't see how anyone can be insured against something that will surely happen.
I know that and they know that. Where is insurance here?