OK. It’s been months, but Suze Orman has crawled back out of her cave and pretended that she knows all that needs to be known about life insurance.
I am a huge advocate of the fact that term life insurance works well for most life insurance needs. The truth is that most life insurance needs have a definable end to them. This is a perfect definition of a term insurance need. But Suze
has this one size absolutely, positively fits all as long as you take the rest of my financial wisdom to heart and absolutely, positively follow it mentality.
Her thoughts on life insurance are summed up as follows:
* I HATE WHOLE LIFE INSURANCE
* I HATE UNIVERSAL LIFE INSURANCE
* I HATE VARIABLE LIFE INSURANCE
* THE ONLY TYPE I LIKE â€“ FOR THE PURPOSES FOR INSURING YOUR LIFE â€“ IS TERM INSURANCE!
* If you are smart with the money you have today and you get rid of your mortgages, car loans and credit card debt and put money into retirement plans you donâ€™t need insurance 30 years from now to protect your family when you die.”
If you’ve followed my blog, you know I’m not big on whole life or variable life. Personally I believe there are better ways to invest excess money.
But, there are needs for permanent life insurance. For the life of me (and any other financial advisor that knows what they’re doing) I can’t figure out how you provide estate tax protection through life insurance with term. If you do all of the “smart” things that Suze recommends above, at the end of whatever term you can buy, you will have a substantially larger estate for having done the right things. The need doesn’t go away Suze, it gets bigger. I’m not saying getting your financial house in order is a bad thing, in fact I agree, but it makes your estate larger and if your insurance runs out, it makes it more vulnerable to taxation. I believe this permanent need should be addressed with a universal life policy with a no lapse guarantee. No cash value, just insurance.
Again, I believe term insurance takes care of most needs, but Suze, you’re filthy rich and don’t have a great grasp of the average American family. I carry $50,000 of permanent coverage. At this point in my career I carry a substantial amount of term insurance. By the time the term insurance runs out I don’t believe my wife will NEED the $50,000 given the other assets we should have, but try this shoe on. That $50,000 policy is a universal life policy with a no lapse guarantee. It doesn’t cost squat because it’s just insurance. No cash value. If I die after all the term insurance is gone I want my wife to have $50,000 of instant tax free cash so that she won’t have to make any rash decisions about how to arrange her assets to take care of herself. $50,000 isn’t much insurance, but it will give her time to put a plan into action without shooting from the hip.
Bottom line. These were just a few examples. Term insurance meets most needs, but it most assuredly does not meet them all. In her article Suze Orman answers questions about every conceivable type of insurance. She doesn’t hold any insurance licenses and doesn’t have to carry Errors and Omissions insurance to protect people from her bad advice. She portrays herself as a financial adviser. Grrrrr!