The Insurance Policy You Are Probably Overpaying Forand the One You Are Missing

The biggest insurance mistakes can quietly cost you thousands of dollars. Nichcha/ShutterstockI paid $2,400 a year for a whole life insurance policy for six years before I realized it was one of the worst financial decisions I had ever made. A financial advisor—who earned a hefty commission on the sale—had convinced me that whole life insurance was an “investment” that would build cash value while protecting my family. What he did not explain was that the returns on the cash value were less than two percent, the fees were enormous, and I could get the same death benefit from a term policy for one-tenth the cost.When I canceled the whole life policy and switched to a 20-year term policy, my annual premium dropped from $2,400 to $280. I redirected the $2,120 difference into index fund investments that have grown at an average of eight percent annually. In the five years since the switch, that redirected money has grown to about $13,200—money that would have been trapped in a low-return insurance product with surrender charges.