| One of my client's wives paid me a visit
| |
| | earn from the cash value policy?"She
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| to ask about life insurance, a product I
| |
| | thought a bit before answering. "Well, he
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| was well acquainted with. She told me
| |
| | spent the whole evening going over a
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| that she and her husband were visited
| |
| | bunch of computer printouts that showed
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| last night by a life insurance agent.
| |
| | us how rich we'd be in fifty years when
|
| "Jan, what did he try to sell you?""A
| |
| | we retire, and how much we could borrow
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| $90,000 whole life policy with an annual
| |
| | from the policy if we ever needed a
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| premium of $500. Is that okay?"Knowing
| |
| | loan.""But what did he say about your
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| that few people really understand life
| |
| | protection needs?""Come to think about
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| insurance, I asked her if she really
| |
| | it, hardly anything at all. After we told
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| understood what the agent was talking
| |
| | him that we could afford a $500 yearly
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| about."I thought I did last night," she
| |
| | premium, he looked in a book and said
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| replied, "but when I woke up this
| |
| | that he had found a great $90,000 whole
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| morning, I wasn't so sure. That's why I'm
| |
| | life policy that we could afford. But
|
| here. You once told me to never buy life
| |
| | about protection, he really said very
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| insurance unless I talked to you about
| |
| | little." I could tell that she was
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| it. Well, I'm here. Could we chat about
| |
| | starting to bristle in anger, a sign that
|
| it?"I was glad that Jan was here instead
| |
| | I was doing a good job.I then told Jan
|
| of Mark. I have learned that it is much
| |
| | that people with children living at home
|
| easier to talk to women about life
| |
| | should have, as a rule of thumb, about
|
| insurance than men. Women seem to better
| |
| | eight to ten times their yearly gross
|
| understand the financial consequences of
| |
| | income in life insurance protection. For
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| their spouses' death, especially if they
| |
| | Mark and Jan, that translated into at
|
| are mothers. Most men, however, don't
| |
| | least $475,000. The agent who met with
|
| want to face life insurance because they
| |
| | them should have figured that out and
|
| think that they will never die. Women
| |
| | done his utmost to assure such adequate
|
| know better.I was no stranger to the
| |
| | protection."You see Jan, that agent's
|
| murky world of life insurance. Throughout
| |
| | sole emphasis should have been on your
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| my 20 years as a CPA, I'd often locked
| |
| | financial protection in case Mark dies
|
| horns with insurance agents and financial
| |
| | tomorrow, not about making you a rich
|
| planners who wanted to sell garbage life
| |
| | lady in 50 years. The agent's decision to
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| insurance products to my clients. In my
| |
| | sell you the anemic whole life policy
|
| role as a CPA, I always believed that it
| |
| | would literally rob you and your kids of
|
| was my job to act as a mother hen and
| |
| | $385,000 if Mark dies tomorrow.""But Mark
|
| protect my clients from the wolves.I
| |
| | is not going to die tomorrow. Don't say
|
| began by asking Jan a question that zooms
| |
| | that!""Jan, you don't know that. He could
|
| to the heart of the matter. "Tell me Jan,
| |
| | die tomorrow or in a week from any one of
|
| why are you buying life insurance? What
| |
| | a thousand and one different causes. And
|
| do you hope to accomplish?"She answered,
| |
| | so could you or I. That's why you must be
|
| "To protect me and the children in case
| |
| | fully protected right now. Life
|
| Mark dies."That quickly established the
| |
| | insurance is a today need."I
|
| fact that Jan knew about the key issue:
| |
| | continued..."Jan, remember when I told
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| that life insurance has but one purpose:
| |
| | you that there were two reasons to avoid
|
| protection in case disaster strikes.Then
| |
| | cash value life insurance?""Yes.""You
|
| I asked her another question. "Just
| |
| | told me Jan that the agent spent most of
|
| suppose that you knew for sure that Mark
| |
| | last night talking about the wonders of
|
| was going to die tomorrow. How much life
| |
| | the cash value investment. Now I am going
|
| insurance would you buy on his life
| |
| | to give you the real scoop about that."
|
| ---$90,000 or $450,000 --- assuming the
| |
| | This one always puts the final nail in
|
| premiums were identical?"She looked at me
| |
| | the cash value coffin."The cash value," I
|
| as if I was crazy. "I'd buy the $450,000
| |
| | continued, "is not like an ordinary
|
| policy. Who wouldn't?"I then gave Jan a
| |
| | investment such as stocks, bonds, or a
|
| quick education about life insurance,
| |
| | bank savings account.""But the agent said
|
| explaining that there are only two kinds
| |
| | it was just like a bank savings
|
| of life insurance, term and cash value.
| |
| | account...""It resembles a savings
|
| The problem is knowing which one of them
| |
| | account about as much as a shark
|
| is the better buy.Term insurance is pure
| |
| | resembles a goldfish. Tell me Jan, what
|
| insurance ( protection) coverage. If you
| |
| | do you think happens to the cash
|
| pay the premium and die , the insurance
| |
| | value---the promised pot of gold---if
|
| company will pay the face value of the
| |
| | Mark dies? Who gets it?" The fun
|
| policy to your beneficiary. It is
| |
| | starts..."That's easy," she replied, "I
|
| available to age 95 and can be purchased
| |
| | do...it's our money...our
|
| yearly, or on a guaranteed level premium
| |
| | investment...right? Marsh...tell me I am
|
| basis for 5,10,15, or 20 years. The
| |
| | right!""Sorry, you are wrong. If Mark
|
| product is uncomplicated and very
| |
| | dies, the insurance company keeps it.
|
| inexpensive. The premiums, however, do
| |
| | That means that all that extra premium
|
| increase each time the policy is renewed
| |
| | you paid for so many years goes up in
|
| since the insured has grown older.Cash
| |
| | smoke.""So what do I get if Mark
|
| value life insurance (sold as whole life,
| |
| | dies?""You get the face amount of the
|
| endowment, straight life, permanent life,
| |
| | policy...but you could have gotten that
|
| universal, and a zillion other names) is
| |
| | for a fifth of the premium with a term
|
| the second type. It differs significantly
| |
| | policy.""Marsh...you can't be serious. In
|
| from term because there is a savings or
| |
| | my worst nightmare, I would not expect
|
| investment feature attached--the cash
| |
| | something like this. Are you sure?""Very.
|
| value. About 75% to 80% of every premium
| |
| | But if you want some proof of your own,
|
| dollar goes to this cash value "kitty"
| |
| | get the book What's Wrong With your Life
|
| and the remainder pays for the actual
| |
| | Insurance by Norman Dacey. That's just
|
| life insurance protection. These policies
| |
| | one of many books in the library that
|
| typically last to age 100 and the
| |
| | echoes what I have been yapping about.
|
| premiums remain level for one's entire
| |
| | Don't think I am the Lone Ranger on
|
| life.Thus, in one slick package, a cash
| |
| | this."Apparently she got fed up. Her
|
| value life insurance policy claims to
| |
| | voice rose as she said, "The agent never
|
| accomplish two worthy goals: death
| |
| | said word one about any of this! Are you
|
| protection and family savings. It was my
| |
| | telling me that he bent our ears off last
|
| job to convince Jan that cash value
| |
| | night just to sell us a chump change
|
| insurance fails miserably on both counts
| |
| | policy that will leave me seriously
|
| and that she must, for her and her
| |
| | underinsured just so he could make a
|
| children's sake, buy pure term life
| |
| | bigger commission...and that they steal
|
| insurance and nothing else."Jan, there
| |
| | my investment to boot if Mark dies?""That
|
| are two reasons why you must not buy that
| |
| | about hits the nail on the head. And one
|
| whole life policy or any other cash value
| |
| | more thing...when you tell the agent you
|
| product. First and most importantly,
| |
| | want a term policy instead, expect
|
| cash value life insurance is anywhere
| |
| | another visit from him. Be aware that
|
| from five to ten times more expensive
| |
| | they are very well trained in changing
|
| than the equivalent amount of term
| |
| | minds. Plus, you might want to shop
|
| insurance. It's like paying $75,000 for a
| |
| | around for the best deal. Even among term
|
| $15,000 automobile just because you went
| |
| | policies there is a wide variance in
|
| to the wrong dealership."To keep their
| |
| | price."EndPostscript:It is this author's
|
| customer's attention away from the high
| |
| | hope that anyone in possession of this
|
| cost of cash value, agents focus their
| |
| | article pass it onto their relatives,
|
| sales spiel on the investment feature,
| |
| | friends, and neighbors. The information
|
| usually with the aid of reams and reams
| |
| | in this article can put many thousands of
|
| of incomprehensible computer printouts.
| |
| | extra dollars in the bank accounts of
|
| This sales tactic has literally duped the
| |
| | those who need it most.Copyright 2000
|
| American public out of trillions of
| |
| | Marsh Kaminsky CPA (retired due to
|
| dollars in the last 150 years, ever since
| |
| | disability)
|
| cash value was invented."Jan, how much
| |
| | e mail: Because of Multiple Sclerosis, I
|
| time did the agent spend last night
| |
| | am a retired CPA. Besides my interest in
|
| talking about the actual insurance
| |
| | life insurance, I have a very strong
|
| protection versus how much money you'll
| |
| | interest in early preschool learning.
|
