Question about life insurance....

[unrepentant_spendthrift]

I have heard it many times here that the only life insurance worth getting is term life. Can anyone please explain why this is so?

I do have term life insurance, but my sister just bought some kind of life insurance where she's paying about 7 times more than my rate.

We are close in age and health history so I asked why the huge difference and she gave me what sounded like a saleman's spiel about how this policy lets her get something after a number of years. She made the analogy of renting vs buying. After 20 years, the renter has nothing to show for all those years of paying rent.....

I did not buy the analogy, since i believe the renter got 20 years of a worry-free roof over his head but how do I explain to her in purely financial terms why term life is better???

[MN-Investor]

Here's a good article which can explain it better than I can - www.smartmoney.com/personal-finance/insurance/term-or-whole-life-8011/.

Essentially, your sister is not only getting insurance, she is also paying for an investment. However, you can usually get a much better return on your money by investing on your own vs. investing with the insurance company. Whole life insurance has a lot of commissions and fees which really eat into the money you're paying the insurance company. You'd do much better by just putting the difference between what you pay and what your sister pays into a low cost broad spectrum index fund.

[unrepentant_spendthrift]

Thanks a lot, MN, that article does clear up the issue for me.