Peer review

Q I recently talked to a life insurance agent who has recommended that I buy a $350,000 whole life policy. She said that it is permanent and that I will always have this insurance, no matter what happens to me health-wise. She said it is a good investment that always goes up. I am a single 25-year-old with no dependents and little debt. Is it wise to make this purchase?

Casper

From the information provided in your question, it appears that you have little need for life insurance.

In fact, you probably have a group policy through your employer that would cover your needs. If you died, there would be no dependents to provide for and few debts to pay off.

Most people should buy life insurance solely for the death benefit. If you are looking for investment options, there are many more efficient ways to invest your money, such as a company retirement plan, Roth IRA or brokerage account.

While whole-life insurance does have a guaranteed rate of return, there are many administrative and commission expenses associated with it, and you have no opportunity to achieve higher returns that are associated with stocks, bonds and mutual funds.

If long-term insurability is a concern, consider a 20-, 30- or even 40-year convertible, level-term policy. With term life, you are paying for insurance only. There is no cash value component, but relatively speaking, it is very inexpensive for the amount of coverage it can provide. The convertible component will guarantee that you can convert it to permanent without proving insurability, if you should ever need to.