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Agents are trained by the companies to sell the highly profitable cash value "life insurance" (pure insurance plus the cash-value account) in preference to pure (term) life insurance. Should a prospect be impressed by the low cost of term insurance quoted him by another saleman, the attempt to dissuade him generally goes something like this: I have nothing against it (term insurance) ... in fact, I sell it. But it's only temporary insurance. When the term is over, say 5 years, you have nothing. Period. And if your family still needs protection, the premium for another 5 year term would be a lot higher. A policy with cash values is permanent; part of the premium goes into guaranteed savings that grow and are yours if you ever decide that you do not need the policy anymore, after retirement, say. All the while you pay at the nice low rate for your present age.*
In the next step, the trained cash-value salesman often produces those marvelous graphs which, he contends, illustrate his point by purporting to compare the costs of whole-life vs. term insurance.
If MISREPRESENTATION is indeed a legitimate concern of state insurance commissioners as part of their regulatory fuction, is it not all the more incredible that these graphs depicting misleading and invalid "cost comparisons" continue to be widely used by the agents selling cash value life insurance policies? Is it conceivable that policy-holders so persuaded to purchase cash value contracts may have recourse at law, by claim of fraud, for the recovery of financial damages from the companies? THE SOLUTION: Buy only TERM LIFE-INSURANCE.NEXT: NOT AN INVESTMENT (NOT QUITE) |