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I love that saying! I have it hanging in my office. I don’t, however, have much fondness for those that it applies to. It would not be hard, or take long to write a book about stupid, harmful life insurance recommendations made by, and I use this reference loosely, my colleagues. The life insurance business is full of agents that will not put their customer’s best interests above their own desire to make money.

Just yesterday I spoke with a woman in Iowa who was in the process of trying to get life insurance on her and her husband. Both in their mid forties. She is a full time mom with five kids ranging in age from 16 to 5. She said they had life insurance in the past, but her husband let it lapse. He just wasn’t OK with paying on term insurance just for the protection. He wanted some return on his insurance premium.

They also wanted small policies on all of the children.

In steps a local agent. A young guy with American Family. He suggests that they get a $150,000 variable universal life policy for each of them and carry the children on a dependent child rider for $10,000 each. The VUL solves the husbands issues with not getting anything back he told them. The children were no problem since they were just riders. He didn’t even ask health questions about them.

So my take on this recommendation? Any agent that thinks $150,000 is going to keep the boat afloat with that large a family, if either the mother or father dies, is either still living at home, is intentionally giving bad advice to make higher commissions, or is stupid. The other thing is don’t ever quote anyone, let alone 5 anyone’s without asking about their health. As it turns out, 1 of the children has a serious health condition and would not be insurable under a dependent child rider.

My other issue was that the VUL appeared to be underfunded. Since a VUL does not have any guarantees, there is no way to tell if it will even be in force when the youngest child is in high school.

We talked more and the woman admitted that they did in fact want more insurance, but with the American Family VUL, this was all they could afford.

I ran some numbers and it appears that this couple, for the same money, could get as much as $500,000 of return of premium term insurance each, dependent child riders on the 4 healthier children and a stand alone whole life policy on the child with the health problems.

So why didn’t the American Family agent quote that instead of a VUL? He probably doesn’t have access to the product. If he does have access to the product, then he quoted the VUL because it had better commission. I can’t say for sure. American Family doesn’t publish their products and rates like most of the top carriers.

Bottom line. The right thing for this agent to do is present the best product he has and then suggest that his clients see an independent agent to find out if there is something better available. That’s a tough one to swallow. Life insurance agents make money when they sell. That’s the short side. If an agent is looking at the big picture they will understand by referring a client to a place where they can be better served, referrals will come back to them. They’ve done the right thing.

This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.