One topic I have very little knowledge about is Life Insurance.  However I know enough that most people over-think it.  There are many types of life insurance and no shortage of agents who want to sell it to you.  But more times than not, people will often end up with a policy that just isn’t right for their needs.

Again, I don’t know a lot of life insurance but I do know that I like to keep my insurance products with insurance companies, and my investment products with a securities broker.  Why so many people like to mix the two I have no idea.  Let’s say that you’re young (say…. under 40) and it good health, the only life insurance you should likely be considering is TERM insurance.  Term Insurance is pretty easy to understand.  You pay XYZ dollars, and if you get crushed by a bus tomorrow, your insurance company pays ABC dollars to your beneficiary.  Usually this is the way to go to get a locked in 20 or so year policy for a fixed premium and fixed pay-out.  The younger you are, the cheaper the policy will be (obviously).  It’s not unreasonable to get $500,000 or $1,000,000 of coverage for a few hundred dollars a year depending on age and health.  That is often going to be enough to pay off the house (depending on where you live) and put the kids through college with enough left over to comfortably pay the bills if the balance is well invested and now blown on stupid stuff.

Term insurance is also kind of like what you get through employers however you’d have to see if it’s cheaper to get the same coverage outside of your employer’s group plan.  Young and healthy?  You may be able to get a cheaper policy on your own.  But older or in bad physical shape, and that employee insurance plan may be a real bargain as it’s being partially subsidized by the healthy younger employees.

Outside of TERM, the other two most common forms of life insurance are WHOLE and UNIVERSAL.  Honestly, I can’t tell you how these really work but I know they usually aren’t very good options for many who have them.  Both of them basically have a death benefit built in but also a “cash value” investment portion.  Why would you want this type of a product?  If you have money to invest, go invest it into something like Apple or a Fortune 500 Exchange Traded Fund.   I have a couple life policies (one through my employer which is a good value for me) and also a term policy that I’ve had for about 12 years of a 20 year term.  I also have a well diversified portfolio of investments such as stocks which I plan to use to pay for kid’s college.  Simply, I have my life insurance with an insurance company, and my investments with a brokerage house which gives me endless investment options.  Why would I want to blend the two?  Oh wait… I don’t.


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