Oakley Insurance Center

Life insurance is a highly competitive business, in which the salesforce depends almost entirely on commissions.

Life insurance companies pay fat commissions to their agents for selling whole-life policies - perhaps 80 percent of your first year's premium goes to paying the agent's commission - and the premiums for these life insurance polices are often five times that of term. By contrast, the typical commission to the agent who sells a term policy is about 10 percent.

It's no wonder, then, that agents push whole-life insurance policies as if their livelihoods depend on it, because they do. If whole-life policies were beneficial to consumers, our story would end here. The fact is the vast majority of those who need insurance should buy term.

Today, the annual premium on a $500,000 term life insurance policy for a healthy, nonsmoking 40-year-old male might be about $500. The same policy for a healthy woman, aged 30, might cost about $260 annually.

Agents will argue that whole-life policies are superior because you can keep them the rest of your life and build up cash in them tax-free, which can then be borrowed.

That's true enough, but they don't tell you about the high fees and commissions built into whole life as well as surrender charges that often leave you with little or no cash value five and even 10 or 15 years after you take out the policy.