Insurance provides us with protection against risk, and owning insurance policies is a normal part of modern life. While insurance has been around for hundreds of years in one form or another, most of the familiar kinds of insurance we have today are actually a newcomer on the historical scene.

Insurance itself can be traced back to the ancient Chinese, around 5000 BC, as a way to protect traders. There are also stories of a more humanistic form of insurance, with neighbors helping neighbors and settlers taking care of each other during difficult periods in history. While that has no monetary value attached to it like our current insurance policies do, we consider that insurance because of the gesture of caring and providing for someone else. What we think of as life insurance didn’t come along until later.

In ancient Rome there were “burial clubs.” Members of these clubs were protected against funeral costs and their survivors were given financial aid. The origins of the burial clubs were religious. The Romans believed that if someone was not given a proper burial, he or she could not find peace in the afterlife. For all but the very rich, burial clubs were essential to finding peace in death, because every proper funeral required a large and often lavish celebration.

Modern life insurance dates back to the late 17th century in England. Life insurance was originally designed to protect traders and merchants. The first insurance providers would meet their customers at coffeehouses and pubs to draw up insurance contracts. These were the common meeting places of that era. This form of life insurance was designed to protect those who brought goods into the community and those who sold them. It was a way to protect and insure commerce.

The first American life insurance company appeared in 1732 in Charleston, South Carolina, but at its inception, the company only offered fire insurance. Life insurance policies were not offered in the Thirteen Colonies until the 1760’s, but providing them quickly became a big business. After the American Revolution, there were issues with life insurance policies for slaves. One New York insurer supposedly issued 485 policies on the lives of slaves just in two years in the decade of the 1840’s. However, the sale of life insurance on the lives of slaves stopped several years before the 1863 Emancipation Proclamation. The insurance companies, in the North, were ordered by their states to search their records to purge any policies that indirectly supported slavery. There is no record of any such policies being found.

Whichever type of life insurance policy you hold today, one thing for certain is that the history of life insurance has been rich and complex. There is at least one constant, however, that has never changed. Life insurance protects our heirs from whatever life sends their way. Ask any questions to a qualified life insurance agent who can help you find the right life insurance protection for your loved ones. A qualified insurance agent will consider the specifics of your situation and help you find exactly the policy you need.

It’s hard to think about what happens after you die. Whether you believe in a certain religion or not, death is a scary thought. It’s also scary to think about what will happen to your loved ones after you passed. Have you considered life insurance?

Life insurance is the only true way to protect your family financially after you pass. While it’s common to give the money over to your spouse, other people sometimes reward the money to other beneficiaries, including brothers or sisters, children, or nieces and nephews.

Life insurance can stay relatively cheap packed with great benefits assuming you meet a set of criteria. It’s also important to start young and not open up the policy when you are entering a mid-life crisis. Start young because you never know when you’re going to die.

Again I stress the importance of opening up a policy as soon as possible. You never know when death is going to come knocking at your door. It’s unfortunate to think about, but a cold and harsh reality.

If you have a broker, discuss different terms and policies. Try to reach an affordable policy filled with outstanding benefits.

You can prove to the insurance provider that your health is outstanding by taking their required medical examinations.

If you take out the plan early, you now have an option of halting payments when you reach retirement age. If you are concerned about still paying the premium when you no longer make as much money as you did when you worked, you can stop paying the premium. The insurance provider understands and will still award the “fixed term” rate when you pass. But you must start early to enjoy this pleasure.

Never waste time on this earth. The same holds true to life insurance and is something you can trust on after you are no longer here.

The necessity of life insurance today is based around the idea of a family with one or both spouses working outside of the home, and that if one of them dies, the other will be left with financial obligations that will not be able to be met. Most advisers agree that life insurance is supposed to fill that gap.

However, financial professionals often disagree about how much and what type of insurance one should carry. The perception is that term insurance is always the easiest and most cost effective. To this end, many advisers and financial “gurus” like Suze Orman and Dave Ramsey often suggest that their audience forget about cash value insurance and instead focus on good-sounding investments. In short…they hate whole life insurance.

Life insurance agents of course love cash value insurance. The investment industry does a pretty good job of putting down the insurance industry. So…who’s right?

It is sometimes surprising that the financial industry is charged with the responsibility of informing and educating the rest of society about saving and investing principles, and yet many of the advisors that represent the industry seem to be less concerned about truth and honesty, and more concerned about injecting their own personal agenda.

I say that in light of the fact that on both sides of the debate, neither is doing a very good job of defending their position. Many financial professionals are simply leaving out critical information, or appear to not have a very good grasp of how life insurance really works.

Their reasons for lying can be many. Now, there’s nothing wrong with pointing out the shortcomings in a financial product. In the case of life insurance; however, the attacks being made are completely baseless. This is especially disheartening because most, if not all, of these attacks are originating from well known financial “gurus”. Here are a few of the lies being spread around:

Lie Number One:

Don’t waste your money on cash value insurance. It is a complete waste of money because the insurance company collects premiums from you for 20 years and then when you die you only get the death benefit. They keep all of your cash and your family gets ripped off. Besides, you could make more money by buying term and investing the difference.

Fact: Term insurance can be the best type of insurance if all you are considering is the cost. But it is generally the worst type of insurance you can buy to insure your life if you want it to pay off, at least statistically speaking. To understand this, we need to understand how life insurance companies position their product line, and how they make money.

Insurance uses something called the Law of Large Numbers. Basically this is how it works: the larger the group of people you are insuring, the more certain you can be about the number of losses you will sustain.

If I started a life insurance company and I only had one customer, I would be taking on an incredible risk because of the nature of life insurance, if that one person dies, I could be out of business very quickly. If, however, I have thousands or millions of customers, then I can manage the risk. Since no one can predict when a specific individual will die (i.e. no one can predict when I will die), I need a large number of people to study to formulate a statistic. With a large enough number of people, I can make surprisingly accurate predictions about the number of individuals within a particular group that will die in any given year. So…what do the statistics say?

Term insurance just doesn’t pay, at least not for policy owners. That’s because most people live to age 65. Term is expensive long-term. Permanent is a good deal long-term. A few critics will still say “no Dave, term is cheaper - always cheaper”. Oh yeah? Watch this:

A male (let’s use Jim again), age 25 and in good health with a wife and a child finds that he needs life insurance. Jim is looking for $250,000 in coverage. A typical 30-year term policy - a policy that has level premium payments for 30 years - should cost Jim around $370 per year until he reaches age fifty-five. At that point, the premiums jump up significantly (as all term insurance premiums do) to a tad over $4,700 per year.

At age 65, he will have spent $58,780 on policy premiums. Keep in mind that this is money that the insurance company collected but never had to pay back. Since there’s no cash value in a pure insurance (term) plan, the insurance contract pays off only when Jim dies.

What would have happened if Jim had just purchased the same amount of death benefit but used a universal life insurance policy instead? His premiums would have been higher - about $145 per month or $1739 per year. At age 65, Jim has paid $69,560 ($1739 x 40) in premiums. That’s a little more than the term insurance, but he also has $157,000 of cash value inside the policy.

That money can be used on a tax-free basis to supplement his retirement or left alone to continue growing. This is an example of one of many living benefits that permanent insurance has (didn’t your adviser tell you about that?). Some permanent policies also offer an option to spend down up to 100% of the death benefit for any reason in the event of a critical, chronic, or terminal illness. This can be especially useful if you haven’t been able to accumulate a lot of money and something tragic happens to you…and you live!

Lie number two:

Cash value life insurance is overpriced. You can never tell how much money you are spending on death benefit and how much money is actually going into the cash value of the policy. With term insurance, the costs are clear.

Fact: Whole life insurance is not very transparent. So it is difficult to determine how much the death benefit is costing you. That bothers some people. That’s OK. Just don’t buy whole life insurance. Universal life insurance, on the other hand, is very transparent. That’s because UL policies are a term policy with a separate savings account. You can easily determine the cost per thousand dollars of insurance, how much is going to pay the death benefit, and how much is going into the cash value of the policy. Cash value insurance seems expensive in comparison to term insurance (at least initially) because insurance contracts are front loaded as far as fees are concerned. That’s a good thing…because the contract becomes cheaper over time. Unfortunately, the initial cost is really driven home by the anti-cash value life insurance crowd.

Be thankful that you pay some of the fees that you do. It makes saving and investing money a lot easier. In regard to life insurance, you have a choice: the contract can be set up to maximize the death benefit (maximizing the cost of the contract), or it can be set up to focus on cash accumulation (minimizing expense charges). All of the expenses associated with permanent life insurance can be made just as efficient and in some cases more efficient than an investment product. But why compare insurance to an investment?

You will usually get all of your money back that you put into a permanent policy plus interest (depending on how you structured the contract). Additionally, the policy can give you a substantial tax-free income at retirement. The only exception to this is variable life, which typically has no guarantee on cash values

Lie number three:

If you are smart with your money, pay off your mortgage and other loans, and put money into retirement plans you won’t need insurance 30 years from now to protect your family.

Fact: You may not need life insurance in 30 years to protect your children from financial ruin when you die. But you may need it to protect your beneficiaries (whoever they may be) from taxes. And, even if you are “smart” with your money, you can’t predict the investment returns in a mutual fund (or a stock for that matter) inside of a 401(k) or IRA unless you are very good at researching stocks (hint: 99% of the general population is not). It takes years of practice, and even some of the best stock brokers and financial analysts don’t always get it right. The stock market ebbs and flows, and goes through cycles of boom and bust. If your investments take a hit right before you are ready to retire, it doesn’t matter how “smart” you were with your money.

Is life insurance is necessary as you get older? You will be shocked at the costs of even a modest funeral these days. What does the average funeral cost in your home town? Ask a funeral director. What is the inflation effect in the funeral industry. If it costs $12,000 today, what will it cost in 10 years? 20 years? 30 years? Ask any beneficiary who has been left any amount of money what they paid in taxes and if it was financially disruptive to them personally.

That cash value life insurance policy that your financial guru told you to ditch could have bypassed probate, provided an income tax free death benefit and, inside of a life insurance trust, completely avoided the estate tax thereby giving your heirs what they deserve.

Although many so-called experts try to compare life insurance to an investment, don’t be fooled. Yes, life insurance, if properly structured, can build very strong cash values that rival investment products (my guess as to why the investment folks are upset). They try to tell you what a lousy investment cash value life insurance is. But comparing this type of insurance to investing is nonsensical. It’s like asking “how many walkmans does it take to equal an Ipod?”…cash value insurance serves a different purpose from an investment. Each has their own different objectives.

Before you make any decision on whether to buy term or cash value life insurance, think about what you are trying to accomplish. If you want to invest your money, then learn about investing. Learn how to value corporations and buy stocks, bonds, no load mutual funds. If you want a long-term savings, then find an adviser that can maximize your savings through cash value life insurance.