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Do I Need Life Insurance for My Whole Life?

2013 September 6

The answer to this question is an emphatic NO! The insurance industry has done an excellent job over the decades creating and reinforcing the concept that you need life insurance for your “whole life” (hence the name of their most popular product). The reality is that you need life insurance only for a period of time during which your family cannot maintain their financial lifestyle due to debt or a lack of savings. By purchasing term life insurance, your rate is locked in for the time period you choose, you are able to free up funds that can be used to pay down debt, establish your emergency fund, and grow your savings. It makes little sense to overpay for a product now (whole life) so you can have protection in later years – when you shouldn’t even need life insurance at that point! Remember – as you are attacking debt and increasing your savings, you are on a path to reducing and eliminating your need for life insurance altogether so that in the future, those funds can be used more effectively through other investment options. There is no financial justification of spending dollars on a product you no longer need just to get a certain rate of return. The expense of the insurance draws away from the true investment value you receive which is poor to begin with. In addition, since your savings and emergency fund should be established by this point, any final expenses or burial costs should be paid from these funds. Learn more about the “Term vs. Cash Value” debate.