Where should I go to price life insurance?

A good place to start is Term4Sale.com. You can get quotes from many different insurance companies in a matter of seconds, without having to divulge any personal information.

You keep saying “term life” like there’s another kind. Is there another kind?

Yes, there’s permanent life.

That sounds so awesome. Sign me up.

Not so fast, Sparky. Permanent life (also known as a cash-value policy, Whole Life, or Universal Life) is an investment product fused with a life insurance policy. It works kind of like a mortgage: part of your premium goes to pay for the insurance portion and part builds up equity (“cash value”). The longer you hold the policy, the more cash value you build up, and you can keep the policy into your 90s, if you want, which you can’t do with term insurance.

You don’t sound too excited about this.

“I’m a big believer in term life insurance for the most part, since most people have temporary needs,” says Steuer. Permanent life has much higher premiums than term life; it’s complicated; and it produces relatively meager investment returns most of the time.

James Hunt analyzes life insurance for the Consumer Federation of America, and most of his clients come to ask whether they should stick with their cash-value policies. “I would say, generally speaking, more often than not I recommend a change,” he says, because often “the policies produce low or sometimes negative rates of return.”

Hunt often recommends the Universal Life products at TIAA-CREF, which have no commission or surrender fee, two common gotchas in these policies.

So, should anyone ever buy permanent life?

Yes. There are several situations where it makes sense.

First, “when somebody has a special-needs child, it makes sense, because that child will always be financially dependent,” says Steuer.

Second, permanent life insurance can be a valuable estate-planning tool. “Valuable estate-planning tool” is a euphemism for “helps you legally avoid the estate tax.” Of course, there’s no free lunch: in order to pull this off, you have to put your policy into a trust permanently controlled by someone else. “In most things in estate planning, the tension is between control and the tax benefit,” says Fish.

Finally, “I do have some people who really like the appeal of the forced savings,” says Steuer. The type of permanent life policy called Whole Life is especially well-suited to this goal.

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