As a "career" financial advisor, a friend of mine came to me the other day excited about a quote on his term life insurance that would allow him to cut his premium nearly in half and still maintain the same death benefit. He asked me to look it over for him and give him an opinion.
I was startled by several things that my friend had been told by the agent who had solicted him versus the actual information he had been given.
1) The philosophy that the agent proposed to my friend involved the purchase of inexpensive term life insurance in order to be able to maximize the amount a person could invest. This strategy operates under the premise that that the individuals' assets would grow to the point that the need for life insurance would dimish over time until the person would be, essentially, self-insured. (Well and dandy, this strategy has been used successfully by some.) However, upon inspection of the illustration, I noticed that the amount of insurance started out at a base amount but increased every year thereafter, contrary to the strategy proposed.
2) Most alarming though, was the fact that while the first years inital premium was indeed nearly half of my friends current premium, subsequent years premiums began to increase dramatically in each year thereafter.
In a nutshell, what my friend thought was a good deal, and was about to replace his existing insurance for was in fact contrary to what he thought he was getting and to the strategy he was presented with. Somebody was trying to make a buck anyway they could without considering whether it was in the best interest of the customer. I recommended that my friend keep what he had and send his agent packing.
0 comments