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Given your current financial and dependants situation, life insurance does indeed make sense. But did you price term-life? You probably could have gotten the protection at a much lower cost. It doesn't include any of the "investment" stuff, just the protection part. Your monthly costs are not very much lower than my yearly cost for almost exactly the same life insurance.

Whole-life or cash value has a lot of hidden fees and gotchas. In my opinion, based on an experience of a relative buying a whole life insurance policy fifteen years ago and comparing the actual cash value to the "projected" values that they gave him and he kept, they also tend to overstate the gains. Over 15 years, the annual rate of return was less than a passbook savings account would have been!

I believe there is a Motley Fool board about insurance. Read there for more information. Beware that canceling your insurance right away will give you almost no money (your first few years of payments usually just go to commissions to the broker that gave you the "advice" for "free").

You don't say what the index fund is an index of, but assuming it is a stock index fund (for example, the S&P 500), it is not at all comparable to a money market fund for an emergency/job change fund, because it has the risk of long bear markets eroding your capital just at the time you need it. And please don't tell me that you're buying the index fund from the same person that sold you the insurance. Index funds should be no-load and low-fee.

I think the Foolish thing to do is to learn a little more before attempting to invest. In the meantime, you can pay off the enormous studen loan debt.

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