PPL, I wasn't going to reply to this thread but I just can't resist throwing in my 2 cents. I'm going to respond to each and every one of your assertions.
Keep in mind I'm
NOT attacking you
personally.
I'm simply replying to your topic and perhaps offering a perspective from someone with 23 years experience in the financial services industry who has
SOLD hundreds of life insurance policies over the years and earned tens of thousands of dollars in
COMMISSION in the process!!!!!!
Okay, let's play.....
PPL wrote:
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1. All policies fall into one of two camps.
There are term policies, or pure insurance coverage. And there are the many variants of whole life, which combine an investment product with pure term insurance and build cash value.
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True.
But not really accurate.
All polices are either Term or some form of Cash Value. To characterize all cash value policies as some form of Whole Life is simply not accurate.
What would call
Return of Premium Term? It's not "pure" term insurance and it's certainly not Whole Life, however, the insured gets back every penny they paid for the life insurance at the end of the term.
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2. Insurance is sold, not bought.
Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.
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Your comment is a blanket condemnation of an entire industry. Agents don't sit down with clients with a gun pointed at their heads demanding they buy one form of life insurance over the other. That's not how the sales process works.
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3. Whole life is expensive.
Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured.
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PPL, the internal cost of insurance and the risk to the insurance company of providing the death benefit is the same regardless of whether the policy form is Term Insurance or some form of Cash Value life insurance. To compare the premium of a term policy with the premium of some form of cash value insurance with the exact same face amount is an apples and oranges comparision.
Your statement.....
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"many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured."
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.....is patently false.
The
first thing that's determined in any life insurance interview is how much life insurance is
NEEDED. The affordability is a separate issue and obviously a person's financial circumstances will dictate how they pay for their protection.
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4. Whole-life policies are built on assumptions.
The returns quoted by the agent are simply guesses - not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.
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Another blanket condemnation. "Agents" have NOTHING to do with company software or projections and each and every cash value life insurance application submitted is accompanied with a signed proposal from the client clearly identifiying the policy's CURRENT projections along side the policy's
GUARANTEED VALUES.
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5. Keep your investing and insurance strictly separate.
There are better places to invest - and without the high commissions of whole-life policies.
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Another blanket condemnation.
PPL, are you aware that typical agent first year commission for term life insurance is 90%-100% to perhaps 105% of the first year's premium?
There are fundamental reasons why insurance agents are paid
COMMISSION rather than an hourly rate or a weekly salary. I'm quite certain if any insurance company could pay their agents minimum wage to market and sell their products
THEY WOULD.
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6. Buy enough term coverage to fill your needs.
Life insurance is no place to skimp, especially with rates at historic lows.
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The "historic lows" are for Super Super Extra Super Preferred Non-Tobacco Rates that very few persons will qualify for and get the policy as applied. Less than 20% of these policies will be issued at the low ball sucker rate within the 35 to 65 age range.
AND even if
YOU are perfectly healthy in
ALL areas, if your Mom or Dad died of any form of cancer or had a heart attack prior to age 60 you will be slapped with the
Standard Rates which will be just about double the quoted premium.
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7. Match the term of the policy to your needs.
You want the policy to last as long as it takes for your dependents to leave the nest - or for your retirement income to kick in.
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Really? That's it? Just those two criteria are all that one should consider when buying life insurance? So are you saying, Federal Estate Transfer Taxes, Business Buy-Sell Agreements, Employee Benefit Plans, Charitable Funding, Business Loan Collateral Assignments and other such uses are not to be considered?
PPL, does a persons needs and circumstances, wants and desires change over time?
I'm not following your point about holding life insurance until
retirement income kicks in. Term life insurance is certainly not going to supplement anyone's retirement income and retirement proceeds from pension plans would be paid to the named beneficiaries. If you're talking about having life insurance to provide for a survivng spouse to augment income in retirement because of the loss of their deceased spouses Social Security Income then Term Life Insurance is absolutely most inappropriate for
that objective.
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8. Buy when you're healthy.
Older people and those not in the best of health pay steeply higher rates for life insurance - so buy as early as you can, but don't buy until you have dependents.
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Yes PPL,
"Buy when you're healthy." Because if and when you become uninsurable then
YOU CANNOT buy life insurance at any price.
Your statement,
"but don't buy until you have dependents."
is contradictory.
Do you think perhaps a young married couple with no children might want to provide for each other if one predeceased the other? Once again are you saying that having dependents is the ONLY trigger for the consideration of life insurance?
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9. Tell the truth.
There's no sense in shading the facts on your application to get a lower rate. Be assured that if a large claim is made, the insurance company will investigate before paying.
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Hmmmmmmm, shade the facts???? The medical questions on a life insurance application are YES
or NO. There is nothing to shade. Anyone applying for any type of significant death benefit with any reputable company is going to be required to submit to a Paramed Exam, Blood Test and Urine Test at the very minimum. There's not a whole lot of room to shade anything.
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10. Use the Web to shop.
You can get tons of quotes - and avoid the pushy salespeople.
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Yet another blanket condemnation.
Term Life Insurance quotes are a joke. They are sucker rates. Have you seen the commercials? A male age 40 could get $250,000 of coverage for under $15 dollars per month!!!!!
Oh it's true...... for their Super Super Extra Super Preferred 10 year term rates
THAT NOBODY QUAILIFIES FOR. Not to mention the premium explodes in the 11th year and if you become uninsurable you're stuck.
An insurance agent would know this and advise you of the 11th year premium explosion along with the fact of life that one risks becoming
UNinsurable in the future.
By the way PPL. It is insurance agents and agencies who own and market those online term insurance web sites and they are paid 90%-100% to perhaps 105% or more of the first year's premium when you buy the policy online.
So while you may have avoided the pushy commission salesperson the insurance company still paid the
EXACT same commission to the agent who owns the online agency.