Parachute insurance: Pros and con of this insurance

Parachute insurance (also known as personal accident insurance) is an extension of traditional life insurance that offers a sum of money to beneficiaries when the insured dies due to a non-medical reason. This article will go through parachute benefits, how it works, who should get it, and other factors to take into account.

An example of how parachute insurance works are as follows. Jack buys this insurance and sets a $500,000 benefit for his beneficiary family. If Jack dies in a car accident, the beneficiary will receive $500,000 from the policy. This can be useful for families that are in need of money and do not have any other financial sources.

The purpose of this insurance is to give an advance to beneficiaries when the insured dies. The main goal is to relieve some financial burden from the families after they lose their breadwinner.

What is Parachute insurance?

Parachute insurance is also known as “personal accident insurance”, “non-medical life insurance with cash value option”, and many other names.

This insurance is similar to traditional life insurance in that the insured person pays a premium in order to receive a death benefit (a sum of money paid out when the owner dies). However, this type of life insurance has extra options, such as a cash value (that grows over time) and many other benefits.

Because of the extra options, the cost of this insurance is usually higher than traditional life insurance. If you lose your job, you can use this policy to generate income. Please note: Parachute insurance is not your main source of income! It is only supplementary and used for emergencies.

Who should get this insurance?

Parachute insurance is not right for everyone. People with an existing financial situation, such as selling a home and having funds in the bank, are prime candidates for this type of life insurance. As well, a person with enough savings to last at least two years after he dies is a good candidate.

People who do not have enough saved up to last at least two years after their death are also good candidates for this type of life insurance. This can be because of a relative’s death, loss of income, or other reasons.

Parachute insurance is also not right for everyone. People who have the ability to live comfortably during their lifetime and have a good retirement plan are bad candidates for this type of life insurance. As well, people who are at risk of suffering from serious health conditions are not suitable candidates for this type of life insurance due to the risk involved.

How much will I need?

The amount of money that someone should purchase depends on his financial situation.

People who have substantial savings in the bank will not need as much insurance as someone who does not have any savings at all. The person with a large bank account probably does not care about the money itself, but simply wants to leave something for his family after his death.

People without any savings are prime candidates for parachute insurance because they do not have anything they can call their own anyway, whether this is cash or property.


1. Cash value

The cash value of a non-medical life insurance policy is its savings account. This savings account grows through the premiums paid by the insured person, and it is able to be withdrawn if needed.

2. Death benefit

This is paid out after the death of the insured person in order to relieve some financial burden from his family.

3. Loan/savings option

This allows people to either borrow money or save it in an interest-earning account depending on their individual needs.

4. Protection from creditors/suicide

If the insured person dies, his beneficiary cannot be sued for debts that he had. This is also known as a “boundary issue” because it protects the beneficiary from losing the financial assets he has.

5. Right to revoke or cancel the policy

This gives the beneficiary the right to cancel or change the insurance policy at any time. After all, no one wants to choose an insurance policy with money they cannot afford to lose.

6. Other

There are many other options that can be added to a parachute insurance policy, such as being able to cancel it anytime during the first year or earning interest on the cash value.

Parachute insurance

How much is this going to cost?

When comparing prices of non-medical life insurance, you should consider all of these factors:

  1. The age of the insured person
  2. The financial situation of the insured person
  3. Whether the insured person has any savings
  4. Whether the insured person has any dependents (children)
  5. The insured person’s occupation is high risk
  6. Whether they already have sufficient life insurance
  7. If you want to add any of the above extensions, like life or disability
  8. The cost of any other financial products the insured person has
  9. Any company benefits which are included in the policy
  10. Any discounts that are being offered by the company
  11. The amount of financial planning that is done by both the insurance company and on behalf of the insured person


1. The amount of money you have to pay

You will have to pay a substantial amount of money in order to get non-medical life insurance with a cash value option. This can be hard for some people, since they may not have the spare cash to spend on a large sum of life insurance.

2. Not the best policy for everyone

Like I said before, parachute insurance is not right for everyone. It is only suitable for people who are in dire need of financial help and do not have any other options.

3. The age of the insured person

If the insured person is very young, he will not be able to get the cash value option until he reaches a certain age, usually somewhere between 25 and 45. Many people feel that this is unfair and would rather wait until they are older before purchasing a large sum of life insurance.

4. The occupation of the insured person

The higher-risk occupations are not suitable for parachute insurance because they are more likely to face health problems during their lifetime. In addition, people who are not high-risk do not have any money to pay for a large sum of life insurance in the first place.

5. Not suitable for everyone

People who are not high-risk can also not get parachute insurance. As well, people who have negative equity in their homes or other significant assets may not be suitable for this type of life insurance.

6. The cost

People who already have enough life insurance are not going to feel the need to buy another one for a cash value option. In addition, people who do not have any life insurance may not be able to afford it in the first place.


There is no “perfect” life insurance. But, if you have a lot of debts or have a large number of assets you could lose should something occur to you, then buying non-medical life insurance with a cash value option should be one of the top priorities.

When I talk about “life insurance” I am talking about any type of life insurance other than medical life insurance. It can include term life and whole life, the whole point and variable universal life (VUL), etc.

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