The life insurance is not immune from those who would dispense bad advice 1. Because they don’t know any better or 2. Because they rightly assume that in most cases the client don’t know any better. While life insurance falls somewhat short of rocket science, it does have enough variables to put the agent at a decided advantage over the client.
A good example of this is a client of ours who got a second opinion from a whole life agent representing one of the big name whole life insurance companies. This agent was up against a 30 year guaranteed level premium and death benefit term policy, exactly what was called for by a contractual agreement. The client called last week with the stunning news that he had an approved whole life policy that not only had a lower premium, but also offered nearly $300,000 cash back GUARANTEED at the end of the 30 years. This was a legitimately rated case and the only way we could imagine that being true is if the company had made an large mistake or a large exception to the underwriting facts so we asked for the approved illustration.
One of the issues we take to cash value policies, whether indexed universal life, variable universal life or whole life is the ability to manipulate the moving parts, and if a client isn’t life insurance savvy, sell them something that looks like something but in truth is actually nothing. Back to this policy. A Northwestern Mutual policy that was 100% dependent on non guaranteed dividend performance. Ask a NWM agent and they will tell you that NWM has always paid dividends, so there’s really not anything to worry about. What they won’t talk about is, and this is critical when a client needs a policy to stay in force 30 years, that their dividends have gone down almost every year for the last 29. In order for the policy presented to this client to actually last 30 years it would have to stop the 29 year trend and keep it stopped for another 30 years, otherwise it wouldn’t have a level premium or death benefit. It did have the chunk of cash guaranteed at the end, but they left every avenue open to make sure that happened. They could raise the premium on any anniversary date. They could lower the death benefit. The asterisks that denoted assumptions or non guarantees were on every column except the cash value column.
We won’t to stir the pot by saying that all agents that sell cash value policies are crooks like this one happened to be, but the risk in the uneducated client reviewing a cash value illustration is that they will be awestruck by numbers that look like paradise and perform like hell. This kind of manipulation of moving parts is usually something that is done by new agents under the guidance of experienced agents. As beginners at one point we have all seen the senior producers pull a manipulation out of their hat to beat the competition or squeeze something into a budget. The end product wasn’t healthy and darn sure wasn’t good for the client, but it made the sale and taught the junior agent the most important thing about life insurance, making a sale.
Another place we see bad life insurance advice every day is on internet and television advertising for term life insurance through the giant agencies like Selectquote. No one short of Superman is able to read the fine print at the end of the ad that let’s you know that the $17 a month for $500,000 of life insurance is for a 30 year old and a 10 year term. Suggesting that someone that young lock in a term that short is stupid and is nothing more than bait and switch at best.
If you feel like the advice you have been getting on life insurance is less than pro you, call or email us directly. We’re willing to be straight up with you. We can help.
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