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Life Insurance - Why You Need it... and WHY you should avoid certain types of life insurance

You probably don't need to even begin thinking about life insurance until well into your late senior years. However, as I always subtlety suggest in my blogs, planning is better than being sorry.

So.. what EXACTLY are cash value policies and why you should avoid it. A cash value policy is nothing more than insurance that packs insurance and savings into one bundle. Sorry to tell you this, but the ROI is garbage. Anyone who says otherwise is just a really good salesman.

Chances are, even if they were a good deal, expenses would eat up most of what would rightfully be yours. There's been returns reported being as low as 2.5% to 7% after all expenses are taken out. Yikes. Maybe it sounds good to your ears, but the S&P 500 returns close to 12%. So basically I'm saying if you just invested your money in the market, you'd be doing more than doubling it. Yes you read that correctly, MORE than doubling it thanks to compounding interest (you didn't forget about that did you? Refer to my previous blogs here on WhoTrades for an explanation of how compounding interest works :P)

Okay, that's not the worst part about whole life insurance. The savings you finally accumulate do not end up in your spouse's pockets when you die. Only the face value of the policy does.

So don't make the same mistake I did. Buy term life insurance instead or simply invest in the S&P 500 along with other well diversified investments that track companies with successful track records.

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