My recent post about Suze Orman’s lack of life insurance knowledge struck a chord with another life insurance professional, Jack Bobo. While I disagree with the premise of his article “The Tired Tirade Continues” in National Underwriter Magazine, it was refreshing to hear someone other than me with a long history in the business, taking Ms Orman to task for her attempts to dole out oversimplified advise.
Mr Bobo makes his case for whole life insurance by citing a number of instances where the cash value from whole life policies has saved the day. From people who had never been able to save money that suddenly discovered that they had been, by building cash value to Walt Disney using cash value from his life insurance to finish building Disneyland.
There is no doubt in my mind, because I’ve seen it over and over, that if someone buys whole life insurance, there will come a day when they discover that is has cash value and they will use it.
I guess what I wonder rather outloudly is, if a person wasn’t paying those high premiums for whole life insurance, wouldn’t they have money to put into savings? If Walt hadn’t been putting all of his available cash into whole life insurance, is it possible that he would have had even more funds available than what had accumulated in his policies?
Mr Bobo kind of makes the case that if you aren’t buying whole life insurance, you won’t put money aside for a rainy day. That may be true with some people. But if those same people are shown a different way to reach the same objective by an agent who isn’t stuck in a whole life rut, they might just find they have far more cash in their lives than whole life insurance could have ever provided.
Bottom line. If, as Mr Bobo asserts, whole life is a kind of force savings plan, two things come to mind. If a person hasn’t got the ability to budget for a savings plan, what are the chances that their budget for an overpriced whole life policy will work over the long haul? The second thing is, is whole life really the answer for temporary life insurance needs, and if the needs are permanent, shouldn’t they really be addressed with a more cost efficient universal life policy with a no lapse guarantee?
PS. I am not taking Suze Orman’s side. I still think she should go back to insurance kindergarten and start over.