by William Bell

Created on: November 13, 2007

This is not a yes or no question for the informed. It depends on the type of life insurance one considers or owns. Hence, my answer is no, simply because there are so many kinds of life insurance in which so many people are (1) overpaying for premiums and or (2) have purchased the wrong kind of life insurance in the first place, and (3) may no longer need life insurance because they are adequately "self-insured."

Moreover, it is wise to properly protect one's family and assets with proper insurance. However, it doesn't make sense to pay extravagantly for what can be purchased at a more reasonable cost. It doesn't make sense to pay for that which is unnecessary or unwise.

Here is what I mean. Most people are uninformed when it comes to purchasing life insurance. Others are sometimes overly trusting of life insurance agents who may be more motivated by the commissions they earn because of their need to put bread on their tables or gasoline in their cars. At today's prices that is a concern, right?

The first step to understanding how much is too much to pay is to understand what life insurance is in the first place. It is primarily protection against income loss wherein the purchaser purchases an immediate estate in the absence of having the equivalent in cash assets. So, while families are young and starting out, with small children, high education costs in the future, high debts from mortgages, car payments, etc, there is a great need for an immediate death benefit to replace income in the event of loss of the breadwinner(s).

The problem with insurance comes when people want a combination insurance/savings policy. This is good soup, but primarily for the profits of the insurance company. Think about it. How many people buy renters insurance with a savings account attached? How many people buy auto insurance expecting to receive a return on investments at the end of the policy? How my people buy property and casualty (homeowners) insurance so they can have a savings account at the end of the term? No one! Why? Because the premiums would be too high and people understand that they're only buying pure insurance protection.

However, all this common sense goes out the window when it comes to life insurance. Companies have great training programs and very high commissions to motivate agents to sell an inferior savings account attached to an insurance policy.

Buying the wrong type of life insurance, usually that which comes with some type of cash savings account attached

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