Life InsuranceSpoiler Alert: It’s Sooner Than You Think! Let’s face it, nobody really wants to buy life insurance. After all, adding an extra expense to your budget for something you’ll (hopefully) never use isn’t at the top of most people’s wish lists. However, life insurance coverage is a critical part of most sound financial plans. […]
Learn the 4 life insurance rip-offs you must avoid...and 7 surprising situations where it actually makes good business sense!
Life insurance is sold, not bought.
That’s because nobody wakes up in the morning thinking, “Gee, I really want life insurance.” It just doesn’t work that way.
Instead, commission salesmen create “needs” that you’re supposed to have in an effort to satisfy their wants for a commission.
Worse yet, life insurance is a negative expectancy bet. That means it’s designed for you to lose money because the insurance company actuaries price their life insurance policies to ensure the insurance company profits and the insured (you) loses.
Who the heck wants that? No wonder nobody wakes up in the morning wanting to buy life insurance.
But like all things in the financial world, it’s seldom this simple.
A deeper analysis shows there are some very smart strategies for using life insurance for risk transfer, risk management, and as an estate planning tool that makes excellent business sense. Life insurance, like all financial tools, possesses specific unique characteristics making it useful for very specific purposes.
For example, life insurance is the absolute best way to immediately protect your family from years of lost income in the event of an unexpected death. This is an obvious and simple example demonstrating proper use of life insurance; yet, I see few people making the right choices when it comes to life insurance.
According to LIMRA, the life insurance research association, Americans fail to understand simple basics about life insurance such as:
- When does life insurance make sense versus when it’s a foolish purchase?
- Which type of life insurance is best for your specific situation?
- How much should you pay for a given amount of coverage, and how do you know if you’re being ripped off?
- How much life insurance do you really need (versus the inflated amount the salesman will try to sell you)?
- And the value of an independent agent versus buying online.
In the following series of articles, I’ll explain the rip-offs you’ll want to avoid in the life insurance minefield. I’ll also explain the specific situations where life insurance can be a really smart business decision.
The key point is there’s nothing inherently wrong with life insurance. It’s just a financial tool like any other. It can be used intelligently by an educated consumer to achieve specific financial objectives, or it can be misused by a dishonest salesman to take advantage of an uneducated consumer.
I hope this series of articles helps you use life insurance wisely…
(Editor’s Note: The series of articles below will be published throughout 2019. Please make sure you subscribe to our updates here so that you receive each one as soon as it’s released.)
4 Life Insurance Mistakes To Avoid
Below are some common life insurance rip-offs and misunderstandings you want to avoid:
- Whole Life Insurance - The Essential Guide – Whole life is one of the most misunderstood and controversial types of life insurance. Some people even say it’s a scam. Let’s pull the curtain back and look behind the facade…
- Return of Premium Life Insurance – What could be wrong with a life insurance policy that returns 100% of your money if you don’t die within the required time perid? Like all salesman gimmicks, it sounds appealing on the surface. After all, it only costs you the time value of your money. Get the inside scoop here…
- Buying Life Insurance from Your Property & Casualty Agent – LIMRA estimates that over half of Americans prefer to buy life insurance from an agent face to face, causing many individuals to purchase from their home & auto agent. Let’s look at how much that might cost you…
- No Exam Life Insurance – Is life insurance without a medical exam a clever way to fool the insurance companies into insuring you for a better rate than you deserve? Is it worth the extra cost? There’s got to be a catch, right?
7 Situations Where Life Insurance Makes Good Business Sense
Now that you know the obvious life insurance pitfalls to avoid, we’ll look at the 7 situations where this unique financial tool can be applied intelligently to achieve specific financial objectives:
- Life Insurance for Income Replacement – This is the #1 reason to buy life insurance. Simply put, if you are the primary breadwinner for your family and don’t have adequate savings and assets to provide for them in your untimely loss, life insurance fills the gap. Here’s the type of life insurance you need, how much you need, and how to get the best value when buying…
- Business Life Insurance – Have a key employee or executive whose untimely death would send your business into a financial tailspin? Perhaps you’re applying for a business loan, and the lender wants a policy on the business owner. Or perhaps you have business partners and need coverage to fund a buy-sell agreement. This is another valid need for life insurance, but you need to buy it right…
- Company Owned Life Insurance – In the business examples above, we focused on protection. Company Owned Life Insurance (COLI) or Employer Owned Life Insurance (EOLI) is a bit different because it offers life insurance benefits and supplemental retirement benefits as an employee retention tool for businesses. Read why COLI or EOLI plans are used to fund 73% of Non-Qualified Deferred Comp Plans in US businesses with $1 Billion+ of revenue, and why it's used to fund 82% of all Supplemental Executive Retirement Plans…
- Mortgage Insurance (or other large debts) – Do you have big mortgage debt or student loan debt? Life insurance can cover that risk until you pay it off. The risk management objective is to make sure you don’t leave debt burdens or an encumbered home to your surviving spouse and children. Learn how to do it right...
- Estate Planning – Life insurance has many applications for estate planning. Say your estate is estimated to owe $1 million in federal estate taxes upon your passing. Would you rather have your estate depleted by $1 million, or earmark a life insurance payout for Uncle Sam? Here’s what you need to know about estate taxes, estate liquidity problems, and how life insurance can help…
- Charitable Planning – Want to super-size your charitable planning? Perhaps you’d like to reach “major donor” status with your favorite charity or religious organization. Life insurance provides a way for you to do both, even if you don’t have $1 million cash available to donate now. This is how you do it with life insurance…
- Invest in Yourself – There’s a tremendous opportunity to achieve double-digit returns (for your children or beneficiaries) by doing what the insurance companies never intend for you to do… actually pay your premiums for life, and die, still holding the policy. In fact, they’re counting on you NOT to hold onto that policy. Let’s look at how the numbers work…
Smart Consumer's Guide to Buying Life Insurance
- The Smart Way to Buy Life Insurance Online - Shopping around for a quote on life insurance doesn't guarantee you the best deal. This comprehensive guide on buying life insurance online spells out all the secrets insurance salesmen don't want you to know so you can avoid overpaying.
Bottom line is life insurance is just a financial tool. It’s not good, and it’s not bad.
What gives it a bad reputation is commission hungry salesman overstating the benefits and not properly explaining the true financial costs.
This series of articles will help you decide if life insurance make sense for you, or not, and how to buy it the smart way.
How Much Does Life Insurance Cost?
Many people assume life insurance is always expensive, but that simply isn’t the case. When you purchase the right amount and the right type of life insurance, a policy might cost a lot less than you think.
How Does Life Insurance Work?
Although the general concept of life insurance is pretty simple, when you dive into the details, things start to get complicated. Life insurance is a legal contract, and, as such, there are many small details that can make a big difference. Here’s what you need to know about how life insurance works.
Do I Need Life Insurance? Why Is Life Insurance Important?
Life insurance is an important part of a comprehensive financial plan that serves to mange the risk that you might die prematurely. Learn why life insurance is so important, and the real reasons most people need at least some kind of term life insurance policy.
How Much Life Insurance Do You Need?
How much life insurance you you really need? Relying upon an insurance agent’s word or an oversimplified “rule of thumb” can lead you to buy either too little life insurance—or too much! Here’s how to ensure you have the protection you need without paying for too much.
How to Buy Life Insurance Online the Smart Way
There’s more to getting the best deal on life insurance than finding a cheap, online quote. Just because your brother’s-wife’s-cousin or church friend is “in the business” doesn’t mean you’ll get a good deal either. Not even close. This ultimate guide to buying life insurance online reveals the 7 key factors to accurately calculate how much life insurance you need so you don’t overpay, how to match the right policy to your specific needs, plus 13 little-know tricks and tips that can save you a lot of money on life insurance. Discover insider secrets the life insurance salesman hope you never learn…
Whole Life Insurance – The Essential Guide
Did you know that 63.7% of all policies sold are whole life, even though whole life insurance is a negative expectancy bet? Do you know which terms tilt the expectancy of the policy in favor of the insurance company thus hurting you? In this article I explain the complications of mixing life insurance with investments. If you’re considering any form of life insurance then you must read this review to get insights that the salespeople don’t want you to know so that you can make a smart, informed decision…
Should I Buy Insurance From A Commission Salesperson?
The question of the week comes from a reader who asks, “Do you think the only kind of advisor one should hire is a fee based one? I was told by a commission person that when they have a client buy an insurance policy they HAVE to take a commission. Is this true?” To answer that question we must expand the discussion to make some important distinctions that will allow you to make smarter investment decisions…