We heard from a couple in their sixties who had no debts and had finished putting their kids through college. An insurance agent was telling them to spend a prodigious amount of retirement dollars on an insurance policy so that when they were no longer around, they could make their children rich.

We think this is a stupid way to spend your money! Consider taking a vacation instead. If you haven't accumulated an estate that will make your kids rich by the time you've retired, it ain't gonna happen. You've given them an education, a work ethic, a sensible attitude about how to handle their money–the tools to make their way in the world. The commissions from an insurance policy might enhance the estate of someone who sells such policies, but the "investments" aren't going to do a thing for yours!

The Life Insurance Pitch "There are no hidden fees in this policy... believe me!"

The Reality: Don't believe it. Double-check the small print for hidden fees. One notorious example is the annual premium that you're allowed to pay in monthly installments–but the installments add up to anywhere from 4% to 17% more than the annual premium that you've been quoted.

The Life Insurance Pitch: "We'll invest your [cash-value policy] premiums so well that after maybe five or six years' worth of premiums paid, you won't have to make any other payments for the life of the policy."

The Reality:The key word is "maybe." There are no guarantees here. This is known in the industry as the "vanishing premium" trick. The fact of the matter is that many insurance companies are crummy investors, so it's more likely that you'll be paying premiums for many years to come.

Another Life Insurance Racket: The "Specialty" Policy

The insurance industry loves to come up with new products, which is why you often find a financial institution presenting you with a dizzying array of specialty policies designed to pay off for a single event.

You may have heard of "mortgage life insurance" policies, which pay off your mortgage if you die. Then there is "accidental death," which pays out only in case of an accident. There are policies that cover your credit card debts or car loans, so that your loved ones can pay off these bills if you should die or become disabled. Some waive the monthly payments for a time if you lose your job.

Here's some straight talk on "specialty policies": If you should die unexpectedly or become incapacitated, do you think money with these strings attached would be the best thing for your family? The payout from a term life insurance policy is meant to pay off such financial obligations, and your survivors should have the flexibility of using the money for whatever they need most at the time.

More Life Insurance Links:

• Your Complete Guide to Life Insurance
• Knock 25% off Your Life Insurance Premiums
• Four Biggest and Costliest Life Insurance Mistakes

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