The purpose of life insurance is to protect your financial dependents from serious financial problems in the event of your death. Sales persons try to sell whole life insurance to young people with no financial dependents. They’ll tell you the premiums are so much lower when you’re young, get it while it’s affordable. My own opinion is that unless you are absolutely sure your income will never be interrupted, so that you can’t pay the premium and lose all or most of what you’ve paid in, it’s too risky. My income has certainly been interrupted several times over the decades, by layoff, illness, overwhelming expenses.
Term insurance is far, far less expensive than whole life. It gives the most death benefit for the money. The large fees and commissions on whole life, variable life, and universal life put them completely outside my comfort zone. Universal life is sold as an investment vehicle. The thing is, if there comes a time when you can’t pay the premiums, within a few months the whole value of it is gone. That is beyond risky. Making those payments into your own 401k, mutual fund, bank account, or IRA is much, much safer. If you lose your job and stop paying into an IRA, you still get to keep all the money you put into it before.
Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on Amazon.com in both Kindle and paperback versions.