I think I’m finally coming to grips with the fact that the life insurance learning curve isn’t really a curve. It’s more the path of a tether ball. It goes round and round, changing speed, direction and attitude with each full turn and then, BANG, it hits the pole and you start all over again. What used to be a relatively slowed changing industry is changing so fast these days that it’s hard to keep, even a trained eye, up on what’s good and real and what is, well, call it like it is, bad and false.
I hate to get too redundant with blog posts so after I get through going back over some of the life insurance dirty laundry, once again, I’ll get to a major shift in my own thinking just to finish off with something up beat and new. First, and it seems like just yesterday I wrote about this (actually two days ago), but the whole idea of life insurance companies redefining terms and words that have meant the same thing forever is just wrong. What pops into your mind when I say permanent life insurance? Is it this? Or is it the redefined permanent like this? When I first started in the business permanent life insurance meant whole life and it meant that it was guaranteed to age 100 with a level premium and level death benefit and at age 100 the cash value equaled the death benefit. Now permanent can be legally defined and sold in the form of a product with only a 10 year guarantee or even less.
So let’s start by redefining whole life. I just defined the way it was, and if your pockets are deep enough you can still buy it that way, but the new, improved whole life has premiums that run to your age 121 and the cash value in the policy equals the face amount at 121. I am grateful that insurance companies aren’t sacking those that live past 100, but cmon. By the time you’ve reached age 100 you’ve more than paid for the death benefit in most whole life policies. Gosh, if you got it through AARP you might have paid 3 times more than the death benefit, but the point is that charging customers for anything after age 100 is just stupid. Unless life insurance companies are stuffing money in mattresses at a time when they claim that you can make 9% interest with an indexed universal life, which means they have to be making more than that, your premiums plus the interest they make should give you paid up free, no payments ever again, cash in the bank, good as gold life insurance death benefit at 100. If they really make more than 9% it should really probably be paid up at age 85 or 90 but who am I to begrudge them a fair days wages.
The there is the redefinition of conversion. Again back to the old days when I first sold life insurance. Back then agents went to schools and classes so they really knew the products and the answers to tough questions. Back then it was drilled into every life insurance agent’s head that the gold nugget in term life insurance was the conversion option. It gave you the “option to convert all or part of the policy during the life of the policy to a permanent plan at the rate class originally approved without evidence of insurability”. The last ten years have made a mockery of the conversion option. The first step was to change the option to whatever permanent product was available at the time of conversion. Next came a shortening of the conversion period to as little as 5 years. The next step was to limit the available product to either an inordinately expensive product, a product that had a terrible guarantee or a product that wasn’t available at the rate class you were approved at. A good example is Protective Life which has done all three. They used to allow conversion to a really competitively priced universal life with a life time guarantee. Then one day they changed the product and made it the only one available, that was only guaranteed 10 years. . Then with the world screaming foul they made another product available. It was a whole life policy and it was guaranteed for life, but…..it was only available at a standard rate class which meant if your original approval was at preferred plus you were giving up two rate classes and the product was inordinately priced on the high end to make it even more unattractive.
But you’ve heard all of that before.
Bottom line. Today I am announcing that I can no longer in good conscience recommend term insurance with reliance on a future conversion. I will be telling every customer I work with that if a final expense policy is in the thought process for when you are finished with your term, that you should buy a final expense no lapse guarantee UL for $50,000 or $100,000 now. I still believe a whole life, variable universal life or indexed universal life insurance policy is a bad choice, but term with a small GUL has more merit than any other line of thinking now. If you have questions about anything I’ve covered or want to know the most prudent and affordable way to plan your life insurance future, call or email me directly. My name is Ed Hinerman. Let’s talk.