6 myths about buying life insurance

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Myth No. 3: Life insurance is a good investment
Myth No. 3: Life insurance is a good investment © Elena Elisseeva/

Myth No. 3: Life insurance is a good investment

Life insurance, a good investment? Total fantasy, says Steuer.

"I liken life insurance to the casino industry," he says. "How do you think they get these big, flashy buildings and these solid financials? Not by giving you this really great deal."

Each decade, the industry seems to dream up another sound financial reason for you to "invest" in life insurance. In the 1980s, it was the tax advantage of single-premium life policies, which quickly evaporated when the wealthy started flocking to them as tax havens. Recently, corporate-owned life insurance suffered a similar flash and regulatory crash.

Hunt predicts the current sales pitch touting the tax deferral on the cash value buildup within permanent life policies will turn out to be just wishful thinking for many.

"The problem is, 40 (percent) or 50 percent of the buyers drop out within 10 years and never get a good return on their money," says Hunt. His recommendation? Buy term life insurance and stick the savings in your 401(k) instead.

Next time you hear the siren song of life insurance "investing," Steuer says turn up your iPod to drown it out.

"Insurance is insurance; it's not an investment vehicle," he says.


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