Just had a thought about something that's been bothering me in the financial world. We're sitting on over $20 trillion in life insurance coverage across the US, which is wild when you think about it. But here's what really gets me - a huge chunk of that is permanent life insurance, and honestly, for most people this is just not the move.

I keep seeing people get locked into permanent policies and it's frustrating because they're overpaying like crazy. The reason why permanent life insurance ends up being such a bad deal for the average person comes down to a few things. First, the investment returns are just terrible. These policies come with a cash-value component that sounds good on paper, but in practice it underperforms compared to literally just investing that money yourself.

Then there's the affordability trap. Nearly 88% of universal life policies - which is a type of permanent coverage - never actually pay out a claim. Think about that for a second. Why? People can't keep up with the premiums. You hit a rough patch financially, lose your job, or just decide the policy isn't worth it anymore, and suddenly the whole thing lapses. All those premiums you paid? Gone. Straight to the insurance company's bottom line.

Term life insurance solves this problem way better. It's cheaper, it covers you when you actually need it most - when you're young and your family depends on your income - and if you outlive the term, great, you didn't need it. The thing about why permanent life insurance is problematic is that it's supposed to cover you forever, but most people don't keep it forever anyway. The lapse rate is actually just as high as term, but with term that's fine because it's temporary. With permanent, it's a disaster.

Here's another thing that bothers me: insurance agents have massive commissions to push these complex permanent policies. Variable universal life with annuitized benefits? I'm a licensed agent and even I had to read that twice. Most consumers don't understand what they're buying, so they just go with what the agent recommends. The industry knows this and counts on it.

So when does permanent life insurance actually make sense? Honestly, almost never for regular people. You'd need to have maxed out your 401(k) and Roth IRA first - which are way better investment vehicles anyway. You'd need absolute certainty you'll never let the policy lapse. And even then, it's really only for high-income folks dealing with estate tax planning.

If you're already stuck with a permanent policy, don't just let it die. You can surrender it for cash value or even sell it to a third party investor through what's called a life settlement. You'd get maybe 20% of your benefit value upfront and the investor takes over from there.

Bottom line: term life insurance is the answer for almost everyone. It's affordable, it does the job, and you're not throwing money at something you don't understand. The reasons why permanent life insurance fails for most people are pretty clear once you look at the numbers. Do yourself a favor and really think through what you actually need before signing anything.