Saturday, September 8, 2007


Definition: (noun) a person who pretends to have virtues, moral or religious beliefs, principles, etc., that he or she does not actually possess, esp. a person whose actions belie stated beliefs.

I find that most life insurance agents and the so-called "financial advisors" are the biggest hypocrites in the financial industry. How can they recommend others buy some sort of life insurance that builds cash value such as whole life and they don't own it themselves? Most people who recommend cash value life insurance either own term insurance or no life insurance at all.

My company (Primerica) believes in term insurance and thats the only type of life insurance they sell. While some companies are selling term insurance, they are doing it wrong. Other companies sell very short term policies that either renews every year or convert into a cash value life policy. At Primerica, their term policies only converts into term insurance. Primerica offers level term policies for 10, 20, 25, 30, and 35 years.

If you are selling life insurance, you better own it yourself before telling others to buy it. That way you understand your product. If you are an agent that owns whole life or universal life, you should ask yourself why you bought it when you know that term insurance is better? I own a 30 year term insurance because its going to take me awhile to build enough savings in my retirement account where I can be financially independent.

As for those who thinks is a good idea to build savings in a life policy, you are a completely brainwash by what others say. If you kept your savings in a life policy, the only way you can access it is by taking a loan or surrender the policy and pay surrender charges. If you die someday, you may lose all your savings in the life policy (you want to check your life policy on what it says about your cash value when you die). There are so many better ways to put your savings. At Primerica, they teach clients to invest in mutual funds. Mutual funds has historically have an average rate of return of 12% in the past 25 years. You can withdraw money from mutual funds anytime and if you die someday, your beneficiary will either get your investments or take control of it. So, if you have investments, you want to make sure you name a beneficiary or beneficiaries on them (you don't want the government to take control of it and decide who should get the money).

Primerica agents teaches clients to invest on a monthly basis by using the systematic investment plan. Well, if you are a Primerica agent, you better be investing on a monthly basis yourself before telling others to invest monthly. I invest $333/month into my Roth IRA and my average rate of return on my investments in the past 2 years is around 14%. How will it do in the future? I don't know, but I'm betting the stock market will never hit zero.

So, it is safe to say I am not a hypocrite because I own term insurance and investments and thats what I tell my clients to do. It is the right thing to do. It is the logical thing to do. It is the smart way to protect our love ones while building wealth.

1 comment:

Kenneth Andrews said...

Whole life insurance exists for people that have a permanent insurance need. Term will never be the way to go in Final Expense, Estate Planning, Business Succession, Key Person, ect.

In these cases WL makes sense.

Secondly I have 100k of whole life. Why? Because It's for death benefit. The cash value might be useful in a pinch. But ultimately it's for the death benefit.

Further Using WL for cash value makes sense for those in higher tax brackets. If your tax implications are higher than you can benefit from borrowing your own money. It's a tax loophole.