Life insurance is necessary. However, most individuals do not carry enough of it. The idea behind life insurance is that we all die. If your spouse dies prematurely, a life insurance policy will make sure that there is enough income to make your family whole for the financial loss you've suffered. Pretty much every adviser agrees having life insurance is a good thing.

But, this is where the consensus ends (sadly). Most every financial professional recognizes the importance of life insurance. However, "gurus" like Dave Ramsey and Suze Orman have done a good job of painting the picture that cash value insurance is "evil". There is opposition though, and quite a debate over the issue.

The life insurance industry, and all of it's agents, of course love it. For the most part, the investment industry discounts its importance. So, who wins the debate?

It's surprising that the financial industry is supposed to be the educator. I say that only because many of the financial advisors in my industry seem to be more concerned about what the next "hot" mutual fund is...or manipulating interest rate returns, eliminating or disguising fees and disregarding suitability with respect to their clients.

In truth, neither the insurance industry nor the investment industry is doing a very good job of defending their respective positions. Point Blank: Financial "gurus" are leaving out critical information. Either they do not have a very good grasp of how life insurance really works, or they are outright lying. Either scenario is totally unacceptable.

Their motives for deception can be numerous, and diverse. Now, there isn't anything wrong with pointing out the flaws in a financial product, as long as it can be done objectively. However, in the case of life insurance, the attacks being made are baseless and unsound. This is especially shocking because most, if not all, of these attacks are coming from high profile, well known financial professionals. Here are a few common lies, attacks, & misconceptions:

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 companies use the Law of Large Numbers. They sample a group of people (similar age, height, weight, etc.). The larger the group of people they insure, the more accurate they are about the number of losses they will see.

Let's suppose you were to start an insurance company and you only had one customer - let's call him "Jim". You would be taking on an incredible risk by insuring just Jim. If Jim kicks the bucket, then you're on the hook for a lot of money that you may not have. You would be business very quickly (imagine: Jim gives you $20 for a $500,000 death benefit and then they die the very next day...where do you come up with $500K for Jim's family?). However, if you have thousands of customers just like Jim, then you have the unique ability to better control the risk you take by insuring Jim's life. No one can predict when Jim will die, but if you study a large enough group of people just like Jim, then you can begin to make very, very accurate predictions about the number of people just like Jim that will die in any given year. Given the accuracy of insurance companies in predicting deaths every year, what do their statistics tell us?

They say that that term insurance doesn't pay, since most individuals live until age 65. This is why I say permanent is a better deal. In the long-run, it's cheaper. I know, I know...there are probably a few of you saying "no way, it is always cheaper to buy term insurance". Oh yeah? Watch this:

Let's reuse our example, Jim. Let's assume Jim is 25 and in good health with a wife and a Kiddo. He needs life insurance, and he is looking at $250,000 in coverage. A 30-year level term policy would cost Jim around $370 per year until age 55. At that point, Jim's premiums spike to 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 he had, say, purchased the same amount of death benefit but used a universal life insurance policy with slightly higher but level annual premiums of $1739 every year to age 100? By his 65th birthday, 'ole Jimbo would have had a total premium outlay of $69,560 ($1739 x 40). But, he would have built up $157,000 of cash value inside the policy.

That's $87,000 more than his premium payments for those 40 years. That's also money that can be used on a tax-free basis to help supplement retirement. This is called a living benefit, and a feature that term just doesn't offer. Some of the more competitive permanent policies also offer an option to spend down the death benefit if you become terminally ill. This can be helpful if you haven't accumulated a lot of money and something tragic happens to you and you don't die...or you don't want to spend down your savings.

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: With whole life insurance it is often difficult to determine how much the death benefit is costing you. If that bothers you, then don't buy whole life insurance. However, universal life insurance is, in actuality, a term policy with a separate savings account - often called 'the pot of money'. As such, 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 can seem expensive in comparison to term insurance because of the front load (commissions and administrative fees) nature of the contract and the fact that you are forced to save money in a cash account. This is a point that 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?

Over the long-term, you should get all of your money back that you put into a cash value policy with interest (note: the exception to this is variable life insurance which doesn't guarantee cash values). If the policy is structured properly, you can also be left with a sizable amount that can be drawn on in retirement.

Lie number three:

If you are smart with the money you have today and you get rid of your mortgage, car loans and credit card debt and put money into retirement plans you don't need insurance 30 years from now to protect your family when you die.

Fact: I'm not exactly sure what being "smart" with your money means, but advisers like Ric Edelman have done at least one thing right by demonstrating that debt can be leveraged and paying off your home early is rarely a good idea. But beyond that, you may need life insurance to protect your beneficiaries (whoever they may be) from taxes. As for retirement, you can't predict the investment returns in a mutual fund inside of a 401(k) or IRA unless you are very good at researching stocks - which most people are terrible at. Even professional stock 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 just 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.

There are an alarming number of financial professionals that try to draw a connection between life insurance and investing. It's a huge mistake (even supporters of CV insurance make this mistake). Comparing cash value insurance to investing is like asking "how many walkmans does it take to equal an Ipod?". Even if you find an investment strategy that "beats" the insurance product...so what? Cash value insurance is supposed to provide a death benefit with a savings component, not an investment component (despite the mistakes of variable life).

Before you make a final decision on whether to buy term or cash value life insurance, consider what you are really looking for. If you are looking for an investment, then be prepared to look for stocks, bonds, no load mutual funds, options, and other various financial derivatives (and learn how to research them). If you're looking for a long-term savings tool, then cash value life insurance can fit that need very well.