Is your life insurance policy ripping you off?

I just recently talked to a friend of mine.  He's 36 years old, healthy, and single.

He's been paying $50 a month for a $10,000 universal life insurance policy for over 10 years.   The insurance agent told him he could use it to build up cash, but the policy had less than $2,000 he could withdraw.

You do the math: $50 X 12 months/year X 10 years = $6,000.

I hate to say it, but the guy is tossing his money away.  Why?

1. He didn't really need life insurance.  The main purpose of life insurance is to replace the income lost when a person dies.  As a single person, nobody depended on his income and he had enough coverage on the job to handle any funeral expenses.
2. That $50 would have done more work in a retirement plan (like an IRA or 401k) where he could have deducted the payment from his income - saving him close to $150 every year.
3. If he really needs insurance - and he will soon 'cause he's getting married - he can get the amount of coverage his wife will need to handle the loss of his income by buying low cost term insurance

Term life insurance is pure insurance.  It doesn't build up cash but you'll get the most insurance coverage for your money.

You can easily find what you need online [CLICK HERE] and save hundreds of dollars every year.

By the way, here's my advice for my friend.

1. Go to the internet (www.findmyinsurance.com) and get the amount of coverage he needs.  He'll need a $400,000 policy which he can get for about $22 a month.
2. Once that insurance is active, cancel the old policy and use the proceeds to pay down high interest credit cards or pay down the mortgage (usually saves about $3 in interest payments for every dollar paid)
3. Take the $50/mo and increase his 401k contribution.  His paycheck will only be about $35 less 'cause he's using pre-tax dollars.

Now do the math: $22 (life insurance) + $35 (401k savings) = $55/mo

So, for $5 extra bucks he'll get:

• $400,000 of life insurance coverage for the next 20 years.  That's a huge increase over the $10,000 policy he currently has and it'll make sure his wife (and any future kids) can survive the loss of his income.
• $50 in savings to his 401k plan.  At just 6% that money will grow to almost $8,200 in 10 years (compare that to his current universal life policy) and over $46,000 by the time he's 65.