The Life Insurance Debate

by Doris Dobkins

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The debate still goes on, that is which strategy is better for life insurance; to buy cheaper term life insurance or more expensive cash-value insurance. More pressing yet, do you even need life insurance? These are the questions people want answered at some point in their life.

The original purpose of life insurance was to protect people who had not had a chance to build up their financial portfolio, and wanted to protect their dependents from the loss of income due to the early or unexpected death of the family's provider. If the person earning the main source of income lived into middle age and had accumulated enough assets to carry their remaining dependents through the hardship of a future loss, the family would then terminate their insurance policy.

But today, about 30 percent of all life insurance policyholders are single people with no dependents. If you have a family, life insurance is an important part of your total financial plan.

There are some exceptions though. There is probably no need for you to have life insurance if you fall into any of the categories listed below:

  • single with no dependents
  • non-working spouse with no dependents
  • retired and living off investments or a retirement income

If you do need life insurance and do not fall into one of the categories above, then the next step is choosing the right kind of insurance. There are basically just three kinds of life insurance: whole life, universal life and term insurance. Let's talk about term insurance for a moment.

This is a just-in-case policy for a specific length of time that you need coverage. It is the least expensive form of insurance yet protects the family or dependents against financial loss in case of death. It is plain and simple with no bells, bows or whistles.

Term insurance policies are inexpensive because the odds of you dying while the policy is in force are very low. With whole life or universal life policies, insurance companies usually have to pay out the face amount or the death benefit amount. Therefore they are priced much higher. Although they do have cash values, most of your premiums in the first few years go toward the agents' very lucrative commissions that you are paying for.

Straight term insurance avoids high commissions, huge surrender charges, overpriced term insurance and hidden policy fees and charges. In my opinion, the only insurance that most of us need is term life insurance. Low-cost term insurance does not accumulate a cash value for you, but you pay very low commissions for the protection that you need. There are better ways to invest and set aside money for the future than through a life insurance policy. Separate your life insurance from your investments. You will become much wealthier by doing this.

After all, isn't that our goal?

Doris Dobkins is the Money Saving Author of Financial freedom from A-Z: Financial strategies & money saving tips
You can read some additional articles by her at

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