Life Insurance Basics

  • Educate yourself about life insurance from teachers; not salesmen. Read these books: Personal Finance for Dummies, by Eric Tyson, and Making the Most of Your Money, by Jane Bryant Quinn.


  • Only buy life insurance if you need it. Does anyone rely on your income to live? If the answer is yes, keep reading. If the answer is no, it is very likely you do not need life insurance.


  • If you need life insurance, buy term. Cash value life insurance like whole life, variable, and universal are laden with commissions and high fees that benefit the insurance company and its agents. Stay away from these poor products.


  • Buy a level term policy or an ART. A level term policy covers you for a specific period of time like 5 or 10 years. An ART is an annual renewable term policy that can be automatically renewed each year. Identify the one that fits your needs and buy it.


  • If you need term life insurance, go to an online clearinghouse. Avoid the office of an insurance agent. He will try to sell you a cash value policy that pays him very high commissions. Go to a clearinghouses to find the best value on the best term policy. Here is one:


  • Get 6 to 10 times the amount of your income in life insurance. If you make $50,000 then you pick up a $300,000 policy on the low end or a $500,000 policy on the high end. Talk this over with the people you would be leaving behind as you make your plans.


  • Educate your loved one’s on what to do with the money if you pass. Design a specific plan. Write it down and make a life insurance folder that everyone has access to. Also, provide phone numbers and contact information as needed.


  • Let’s see what others have to say about the matter.

My Experts

If you are single with no dependents, don’t buy life insurance. – Charles Givens, More Wealth without Risk


Term insurance is the best buy financially. We give it our value-oriented money-planning award in the insurance area. It enables you to compare policies very easily and gives you more flexibility to shift or to vary amounts of coverage. We recommend it over whole life insurance for the majority of our clients. – Lewis and Karen Altfest, Lew Altfest Answers Almost All Your Questions about Money


In my opinion, there is only one kind of life insurance that makes sense for the vast majority of us: term life insurance. When you sign up for term insurance, you’re buying a just-in-case policy for a finite length of time. – Suze Orman,the Road to Wealth


Term life insurance, like most other forms of insurance, is pure insurance protection and the best way to go for the vast majority of people. – Eric Tyson,Let’s Get Real About Money


Commissions for term insurance are much lower than those for whole life insurance, which can create more incentive for an agent to recommend whole life insurance; profits on whole life insurance policies are generally larger as well. – Lewis and Karen Altfest, Lew Altfest Answers Almost All Your Questions about Money


Never buy life insurance on children. – Charles Givens, More Wealth without Risk


Those in the insurance business, insurance companies and agents, who sell their products and earn commissions, have a bias in favor of cash value life insurance. The reasons are pretty simple. Cash value life insurance costs a lot more and provides far, far greater profits for insurance companies and commissions to the agents who sell it. – Eric Tyson, Let’s Get Real About Money


For almost 70 years the life insurance industry has been a smug sacred cow feeding the public a steady line of sacred bull. – Ralph Nadar, Consumer advocate


Life insurance is important, but not when it comes to investing, and anyone who says otherwise is a liar. – Ric Edelman, the Lies about Money


We don’t like to categorize whole life insurance as an investment vehicle because the cash value built up through yearly investing is not paid out at death, only the face amount of insurance in force upon the insured’s death goes to the beneficiary. Any loans of cash value are deducted from the death proceeds. – Lewis and Karen Altfest, Lew Altfest Answers Almost All Your Questions about Money


How would I buy life insurance? I would start with low-cost term insurance, expecting to cancel it when I retire or when my kids are grown and my spouse is self-supporting. I’d find the insurer through a quote service. I’d build up investments somewhere else, in retirement funds, stock-owning mutual funds, Treasury securities and real estate, to guarantee my security. I would buy no life insurance on any of my children. – Jane Bryant Quinn, Making the Most of Your Money