I have never been an insurance salesman (person) per se. But I did work for an investment company that sold variable and universal life insurance, which is a kind of investment/insurance product. But in order to sell the product, I had to have an insurance license in addition to my securities license. So 10 years ago, I obtained a state insurance license.

I enjoyed my experience as a financial advisor because I enjoy financial planning. I did it for a few years, but I soon gave up on it because I felt like I was being asked to push products on people that they did not need. The mission was to sell highest commissioned products, not the best product. And I did not feel right doing that.

Anyway, in my short career as a financial advisor, I realized that many people have no clue about life insurance. They may know the premium and the face value, but that’s about it. Most regular people don’t know the basic difference in life insurance options. And unfortunately, they are being bamboozled by unscrupulous salespeople who are looking for a commission. Not all life insurance salespeople are bad, but there are quite a few who are.

Before you buy your policy, you should understand your needs and understand which type of policy best fits your needs.

Do you need life insurance?

If anyone other than you depends on your income for survival, then yes, you need life insurance.

How much do you need?

It depends. If you have minor children, you’ll probably need enough to cover their needs for until they are at least 18 or out of college. Or if you have disabled children, you’ll need enough to cover them for the rest of their lives. If your spouse is dependent on your income, you’ll need enough insurance to carry him/her until he/she becomes self sufficient or remarried. You’ll also need enough to pay off your debts and funeral expenses.

It really just depends. But in any event, I would venture to say that most people need a minimum life insurance of $100,000, and likely much more. You can go here to evaluate your needs.

The basic types of policies (presented with commission and need rankings)

Commission rankings are shown from highest commissioned sale for agent (1) to lowest commissioned sale (3). Need rankings shows which types of insurance met the needs of most people (1) to which met the needs of the fewest people (3). (Just an aside, the highest commissioned product is needed by very few people.)

Universal Life – Rank: Commission 1 Need 3

Features – Coverage for your entire life, Has both a death benefit and cash account (you cannot choose how cash account funds are invested), Offers flexibility in premium payments

My opinion – final death benefit increases overtime, but most people’s life insurance needs decrease over time as they build other assets and as their children become independent. The premiums are usually 5 or 6 times more than term life. I suggest that you buy a term policy and invest the difference in the premiums in a decent mutual fund. That way you don’t have to die to access to the cash account.

Variable Life – Rank: Commission 1 Need 3

Features – Coverage for your entire life, Has both a death benefit and cash account (you can choose how cash account funds are invested), Premiums are fixed

My opinion – same as above

Whole Life – Rank: Commission 2 Need 2

Features – Coverage for your entire life, Builds minimal cash value

My opinion – almost the same as above. A person’s insurance needs decrease over time.

Most 87 year olds don’t need a $1 million in life insurance. By the time you reach retirement age, you should have accumulated enough assets to take care of your spouse when you pass away. And your children are what? 62, your grandchildren are 38…? They are not dependant on your income. I’m sure they’d rather you spend the premium on pampering yourself in your golden years.

And besides, whole life policies cost nearly 3 times as much as term. Multiply that difference over your life and that is a lot money. Get a term policy, stash the difference in a mutual fund every month and let it ride. You’ll fair off much better.

Term Life – Rank: Commission 3 Need 1

Features – Covers your life for a predetermined number of years… 10, 20, 30, 40 years, Doesn’t build cash value, Least expensive premium

My opinion -It offers the most coverage during the time you need it… at a nominal cost. Term life is the right choice in most situations.