Saturday, October 11, 2008

Is term life the best choice for everyone? Or is this just sales manipulation?

In 2003, while still in Minnesota, I was invited to interview for a role in Citibank’s Primevest. The company, which recruited at job fairs in a down economy then, was seeking to set up an operation to get people to convert their life insurance to term from any other form (whole life, interest-sensitive universal life, or even variable life). During the sales pitch, the presenter said that this is a potential $40 trillion market. That was five years ago.

You often hear financial people say on television today that the only kind of life insurance someone should have is term (with no residual cash value), because it is far cheaper for the same level of protection.

Not all agents agree with the idea that everyone should race for the exits from other products. But if you have substantial dependent responsibility and if their financial well being needs to be insured, then term makes the most sense for a lot of people.

Other forms of life make sense when parents buy them for kids. Over a lifetime, the cash value or investment portion can accumulate a lot of value, which could come in handy should there be some calamity.

When I was 35 and had just moved to Dallas from New York, I got a call from somebody from AAA about a whole life policy. Yes, he came to my apartment and I let him manipulate me into buying a whole life policy from Standard Life of Indiana (back in 1979). I eventually surrendered it and got some money back out. I wouldn’t let anyone do that today.

It seems that so much of our workforce is committed to manipulating people into buying things that ought to be more transparent to start with. If term is right for you, it should be simple and there's no reason that you need to pay an agent commission, it would seem. No wonder we are living beyond our means.

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