I was contacted by an insurance agent during my 30’s when I had two young children. I was fortunate to have a friend who had worked after college for a few years selling life insurance. He told me to ignore the fancy brochure from the agent and to purchase term insurance.
Now there are readily available information on the internet for those considering life insurance options.
Quote: “Term life insurance makes more sense for almost everyone”
Then read the second recent article which adds considerable detail . Whole life insurance is not the best choice even for most high income individuals
Quotes: “The short version of this post is that you will probably neither need nor even want a whole life insurance policy once you understand how it works”.
“Given the size of the commissions offered on these policies (as much as 50%-110% of the first year’s premium), one should not be surprised to see agents become highly motivated to sell them.”
“There are other types of permanent (lifelong) insurance policies, including variable life insurance and various types of universal life insurance may offer more flexibility.. but they generally offer significantly fewer guarantees. …The same general level of caution should be applied to their purchase as with whole life insurance.”
Term Life is just the insurance part of a Whole Life policy, the rest of the premium is “investment.” And, not a great investment at that! For those not disciplined enough to save and invest on their own, whole life policies may make some sense. First, one has to understand the purpose of life insurance. It is to replace someone’s income. If a spouse dies, especially if they are the primary breadwinner, how does the family move on and survive? You should buy enough insurance that the payout invested would generate income to replace the lost income and not eat the principle amount. That’s ideal, but do get as much as one can reasonably afford and for the term that it is needed. At some point, like in retirement years, there is little need for life insurance, unless you just want to leave your heirs a chunk of money. It does pass through tax free. I had a friend that sold mega policies to the ultra wealthy for protection from the death tax as there was a loophole in the tax laws that made it work. I believe that loophole was closed though. He made millions before they closed it. Don’t be insurance poor, but having some good coverage is a very unselfish thing to do for your loved ones. Not only for the spouse and children, but also for those who might need to pick up the slack you left behind.