Complaint Review: ALL or MOST Life Insurance Companies

Mark in Seattle Washington,

I am always astounded when people start out by writing how qualified they are at something. I would rather read what they write, that will tell you how qualified they are. Although you claim that both Term and Prem are good in your rebuttal you talked about Perm 99% of the time. I know there is good money to be made selling whole life vs. Term (that is why it is still to this day the number one type of life insurance sold), however does that make it right for the consumer.

That's look at some of the points you made:

You said: I will say this first, in countless encounters with clients, I have NEVER met anyone who, having purchased a permanent insurance contract and maintained it for a significant amount of time, AND funded it properly, was not happy they have it. I have however, many times, ran into too many people who purchased term years ago and were sorry they did because they became faced with spiraling costs, and nothing to show for their investment.

I am not as qualified as you appear to be but if you never encountered anyone who was not happy with their permanent insurance (even if they had it for 40 years) you have got to be the luckiest human being on the planet. Making over reaching statements that no one you know dislikes their permanent insurance weakens your credibility.

As for facing spiraling costs for term as you get olderABSOLUTELY!! No one in their 50's, 60's, 70's (and so no) should be looking to purchase insurance of any type. Life insurance is cheapest when you are young, why because your chance of death is lower and as you get older your chance of death grows higher and higherfor no one gets out of this world alive. People should purchase the highest amount of life insurance they need and as inexpensive as possible (that usually is Term). People should also be investing money (as much as they can, as often as they can) when they are young.

Now that's take a look at this statement you made: I have however, many times, ran into too many people who purchased term years ago and were sorry they did because they became faced with spiraling costs, and nothing to show for their investment.

For you to make the statement that people who buy Term have nothing to show for their investment is TOTALLY WRONG. Why, because life insurance is not an investment it is insurance and what is the definition of insurance. You being so well qualified should know the difference between the two.

Your next statement: George - your statement about the insurance company 'keeping the cash value' is very misleading. The proper way to view it is that the company is refunding the cash value to the client, PLUS the difference between the cash value and the death benefit. Regardless, if it weren't for this deceptive slant, people would realize 'hey - no matter where my money is or isn't, the death benefit is paying out more than my money'. Tell me what other investment out there would pay out say $500,000 when someone only had $10,000 invested? Answer - NONE - except for permanent life insurance. I know term does too, but it maintains no cash value - just trying to make a point here

Let me get this straight, you are trying to say that because the insurance company pays your beneficiaries $500,000 and not $500,000 plus the cash value is a good thing. You have got to be kidding, what investment company do you know of keeps your money when you die, oh I am sorry we aren't talking about investments we are talking a life insurance. Only in life insurance does $500,000 + cash value = $500,000.

Next statement: To those of you who read this and are not in the industry, I give you this advice - buy a sizeable amount of permanent insurance (which should be determined through a needs analysis done by a QUALIFIED insurance agent or fin. planner) when you're young - if you can afford it and still reasonably meet your other needs (such as retirement savings, mortgage, etc.). As you age, you will be incredibly grateful you did.

Again you mention if you can afford it.Why is that, because Permanent insurance is very costly even at a young age (compared to Term). You would rather stick some young family with costly Perm. It is funny that in the beginning of your rebuttal you talked about not being for Perm or Term all the time but if you ran across a young couple and all you can do is advise them to buy a sizeable about of permanent insurance and not term insurance shows your bias towards Permanent insurance.

Next statement: The problem with the 'invest the difference' geniuses is this - what if you don't save enough, or your investments don't perform well enough and you're now at retirement age with a term policy that is becoming exponentially more expensive (it happens ALL the time)? These morons operate under the premise that you WILL have enough saved up to 'self insure' - but what if you DON'T. A permanent policy (UL or Whole Life) would most likely be self sufficient at that time and providing you with protection. Whereas, a term policy would be becoming so expensive, that you would be forced to cancel it when you need it most or convert it to a permanent policy and even higher rates because of your age.

Well speaking for the morons I will say this, if most of the people you encounter are lazy and want someone else to look out for their future you are the perfect individual. Your premise that people cannot save on their own is insulting and degrading. You want people to use their life insurance as their investment and you know that is a no no. It is so obvious that you know nothing about investing but you know plenty about making money off of the lack of knowledge your clients have.

Next statement: The other flawed premise these people operate under is the assumption that debts will be lower - a HUGE mistake. How many people do you know who, at retirement, still have a mortgage - maybe a relatively large one, as well as car loans? This is still debt that should be protected with life insurance - after all - why would you want to liquidate your own assets to pay for liabilities at a spouse's death if you could leverage your dollars and get a death benefit that is greater than the amount invested?

Again you use the terminology of investing and that is just wrong. Can people have debts in retirement? They sure can but even if they do, if they bought your Permanent insurance would they have enough to pay off those debts and have money left over? Oh again my mistake, because Permanent insurance is so expensive they wouldn't be able to afford the coverage they really needed. So even with your Permanent insurance they would probably have to liquidate assets to cover the short fall.

Now last but not least you stated: ps - By the way - this perception of life insurance companies robbing people is absolutely evil. Again, I don't work for a life insurance company - I work for an independent firm, so my statements are not defensive knee-jerk reactions - they are based on years of experience and observation. If it was such a robbery, why is it that the largest life insurance purchases are by multi-millionaires and billionaires to help offset estate tax liability (permanent insurance is used almost exclusively by the way). These people are usually in their 60's and older, and COULD afford to 'self insure' as the 'buy term invest the difference idiots' would say - but they DON'T. Now, don't you think with the arsenal of lawyers and CPAs these people have at their disposal that if the insurance companies were so bad, and permanent insurance such a bad deal, that they of all people would figure it out? So do I.

Well it is interesting that you bring up mult-millionaires and billionaires. Do you really know any. I mean cash multi-millionaires and billionaires. Not folks who say they have a net worth of a million but have $100,000 in liquid assets. For any person that is a true multi-millionaire or billionaire has no need for life insurance (Perm or Term). And as for Lawyers and CPA's if they are making a cut off of the insurance they recommend to their clients then permanent insurance is not such a bad deal for them. You obviously are not a financial planner or even a bookkeeper, what you are is a insurance salesman who enjoys the money you make off of unsuspecting and uninformed individuals.

I guess you must make some money off insurance, Mark. That's why you're rushing to defend it.

Here's why insurance is a bad deal. It's really very simple, Mark.

They take money your money and keep a lot of it for themselves!

That's right, they take a portion of your investment. And, keep it for themselves.

If you invest for yourself, they don't get s**t!

Now, you tell me, which is better? Giving some of your money away to an insurance company, or keeping it all for yourself?

I already have to hand over a lot for taxes. The idea is to keep all of what's left. Not to hand any of it away to some company.

Here's how you invest for yourself. It doesn't take much. Start with just $150 a month. Put it into a bond or tax-deferred savings plan. Start when your 20. Keep doing this until you're 65.

You walk away with a million dollars. For just $150 a month.

You keep it all. No insurance company gets a split. You don't pay any premium to anyone.

Nobody makes a buck off you.

That's what I call a good investment!

You can hand away your money, Mark. You probably don't do any real work anyway. Shuffling papers isn't work. That's something a secretary does.

So, that's why you're content to hand your money away. Let your clients do the same thing too.

I couldn't care less.

But, I'll keep as much as my money as I can.

Insurance? No, thanks!

Paul, don't know where you work (Crimerica perhaps), but you too are providing about 10% of the truth.

First, insurance companies do indeed invest the proceeds. But - for you to say that if you invest on your own, you will exceed what you have invested in a policy is an outright lie. No LEGITIMATE planner would ever guarantee one investment over the other. You have absolutely NO guarantee WHAT rate of return you will get. And, to be honest, I would bet that consumers relying on insurance companies to invest their money would do exponentially better than those investing on their own as you suggest. Also, unlike outside investments, permanent insurance policies have GUARANTEED cash values - yes - that's right - GUARANTEED. These guaranteed values do not represent a stellar rate of return, but they are, nonetheless, guaranteed by the insurance carrier. So you tell me, Mr. 'invest elsewhere' - what investment can you buy that if you place say $5000 in the first year, would not only guarantee you a cash value regardless of the company's performance, but would also provide a benefit if you were to die in that first year that is say $500,000? Hmmm...the answer would be - NONE - because permanent insurance is the only vehicle with both of those attributes.

You should always have outside investments AND proper insurance - the two are not mutually exclusive. The worst thing about what you said is where you conveniently glossed over the most crucial point about how values in an investment at first won't be as much as a death benefit.

YOU'RE d**n RIGHT THEY WON'T. If you have a million dollar policy, the company pays a million dollars. If you're investing $10k a year and you die 2 years later, guess what - your family gets $20k. What would a rational person rather have - $20k or $1 million?

You're right about insurance companies projecting mortality - they do it very acurately. They also assume a huge risk for those insureds who die prematurely - that's the vital service they provide.

The points you tried to make are exactly what are being perpetrated by unsound financial planners giving poor advice.

Again - to the layperson, take care of your protection needs first, then save for retirement, then focus on accumulation goals. And, in the protection planning, buy a sizeable portion of the amount you need in permanent insurance - you'll be glad you did - I can promise you that.

And, as I said before, I don't work for an insurance company and am not some covert industry insider - I am an educated executive in the financial services industry who is sick and tired of the mistruths and misrepresentations perpetrated by people such as Paul and George.

How does insurance work?

Whole life or term, you pay a premium. The carrier invests that premium.

Like any insurance company, they take in more money in premiums and investment returns than they pay out.

They can pretty well determine, in advance, when you will die. They know exactly what they will need to pay out. Their job is to make money by investing your premium so that they can pay the policy and still have plenty of money left over.

If, as indicated above, you buy term insurance, then they may get to keep all your money. If you don't die before the coverage runs out, they keep everything.

Naturally, the company worked all the numbers in advance. With a large group of policy holders, they will make money. No doubt about that.

So, why not make your own investments? Granted, in the beginning, the value will be far less than a comparable insurance death payment. But, as time goes on, the value of your investments will far exceed the value of any insurance coverage you could buy for the same money.

Forget the complicated terminology! All that you need to know is that insurance companies are in business to invest your money and give you back as little as possible.

So, cut them out of the deal! Invest for yourself! Let Mr. Insurance Salesman actually do some real work for a change if he wants a new Mercedes. Let him produce something, instead of making his living by siphoning money from hard-working Americans.

Betting on life insurance? You have to die to win that bet!

George - not sure of your background, but you give only about 20% of the proper perspective. First, I have been in financial services for about 9 years. I have extensive insurance industry knowledge and work in an executive capacity for a financial services company, but for the record, do not have a blindly militant support for permanent OR term insurance. Both are good, and both have their place. Anyone who arbitrarily says 'always buy term' or 'always buy perm' should have their licenses revoked.

I will say this first, in countless encounters with clients, I have NEVER met anyone who, having purchased a permanent insurance contract and maintained it for a significant amount of time, AND funded it properly, was not happy they have it. I have however, many times, ran into too many people who purchased term years ago and were sorry they did because they became faced with spiraling costs, and nothing to show for their investment. And, for those reading this, there is more than just whole life out there as people keep referring too - whole life with a reputable company is a good product, but Universal Life is generally more affordable.

George - your statement about the insurance company 'keeping the cash value' is very misleading. The proper way to view it is that the company is refunding the cash value to the client, PLUS the difference between the cash value and the death benefit. Regardless, if it weren't for this deceptive slant, people would realize 'hey - no matter where my money is or isn't, the death benefit is paying out more than my money'. Tell me what other investment out there would pay out say $500,000 when someone only had $10,000 invested? Answer - NONE - except for permanent life insurance. I know term does too, but it maintains no cash value - just trying to make a point here.

To those of you who read this and are not in the industry, I give you this advice - buy a sizeable amount of permanent insurance (which should be determined through a needs analysis done by a QUALIFIED insurance agent or fin. planner) when you're young - if you can afford it and still reasonably meet your other needs (such as retirement savings, mortgage, etc.). As you age, you will be incredibly grateful you did.

The problem with the 'invest the difference' geniuses is this - what if you don't save enough, or your investments don't perform well enough and you're now at retirement age with a term policy that is becoming exponentially more expensive (it happens ALL the time)? These morons operate under the premise that you WILL have enough saved up to 'self insure' - but what if you DON'T. A permanent policy (UL or Whole Life) would most likely be self sufficient at that time and providing you with protection. Whereas, a term policy would be becoming so expensive, that you would be forced to cancel it when you need it most or convert it to a permanent policy and even higher rates because of your age. The other flawed premise these people operate under is the assumption that debts will be lower - a HUGE mistake. How many people do you know who, at retirement, still have a mortgage - maybe a relatively large one, as well as car loans? This is still debt that should be protected with life insurance - after all - why would you want to liquidate your own assets to pay for liabilities at a spouse's death if you could leverage your dollars and get a death benefit that is greater than the amount invested?

Bottom line - the 'buy term invest the difference' philosophy is a precarious path to walk - if you want true long term safety, invest in a permanent policy with a REPUTABLE company (aka, NOT primerica). And, know that it's ok to have both term and permanent - in fact, it's ideal. The term you can decrease or cancel as your liabilities decrease and the permanent will always be there as a protective shield for the long-term.

In closing, I give this advice - I have tried to present a case in an objective and descriptive fashion in the hopes of waking up the average consumer who may read this. Unreputable financial 'planners' have already made up their mind and are spilling their poison into the general populous, and I most likely won't have an effect on their practices. But, for the lay person, if you want to know how to approach the life insurance dilemma, contact an experienced life insurance agent at a reputable life insurance company and arrange for a free needs analysis - virtually all agents are honest, trustworthy, and very good about creating a program for you that is within your budget and correct for your situation.

ps - By the way - this perception of life insurance companies robbing people is absolutely evil. Again, I don't work for a life insurance company - I work for an independent firm, so my statements are not defensive knee-jerk reactions - they are based on years of experience and observation. If it was such a robbery, why is it that the largest life insurance purchases are by multi-millionaires and bilionaires to help offset estate tax liability (permanent insurance is used almost exclusively by the way). These people are usually in their 60's and older, and COULD afford to 'self insure' as the 'buy term invest the difference idiots' would say - but they DON'T. Now, don't you think with the arsenal of lawyers and CPAs these people have at their disposal that if the insurance companies were so bad, and permanent insurance such a bad deal, that they of all people would figure it out? So do I.

Hi George, what you say makes perfect sense. Looking into more companies and the actual structure of their Whole life policies I would not recommend any of them - except for one company - I won't be plugging anyone here, so I will stay quiet on who that is with. (Rated A+ by A&M Best for payouts by the way) But I do agree with you. The one thing to note is that people do not see the difference in purchasing power that the dollar will have over time. A $10,000 policy you bought with 1982 and 1983 dollars for example pays out 10 grand in 2005 dollars... Now how do you tell if it was really worth it? Pretty hard, and a headache that many of us simply do not need. If it costs more than what you get, then why not just have the money in a bank account? Co-owned with someone else of course, otherwise it will be frozen at death. I'm done, good bye!

Hudson from Saskatoon, Saskatchewan worte:

"Now my second question, How much do you have to show for this great term policy after all is said and done? ZERO. Your agent who sold you this either has no idea about the mechanics behind the insurance that he is selling, or genuinely believes that IT IS IN YOUR BEST INTEREST to spend around $75000 throughout the course of your lifetime for this Term policy and have absolutely nothing to show for it.

While he is sleeping on a large pile of money from the commissions and percentages from your investments, you can sleep on that - knowing that your money has been effectively thrown out the window."

Please Hudson do us all a flavor and tell the whole truth. You are correct that once your term policy ends it ends. You have no cash value in the policy. But what happens in a whole life policy. If you don't use the death benefit you can collect the savings that have built up in the policy or if the death benefit gets use your family will not also get the built up cash value (that stays with the company).

I ask you who is sleeping on a bigger pile of commissions a term insurance agent or a whole life insurance agent (since we all know that whole is way more expensive to have), and I am not just talking about in the beginning of the policy. Term insurance is meant to cover a period of time a time in which you should be earning money and saving it yourself. That way when it is time for retirement you are basically self-insured and have no need for life insurance of any kind.

I do understand and agree that if a person is the type that can not save any money on their own maybe a whole life policy would be better (better than no savings at all).

I am a Financial Security Advisor with a reputable company and have worked for a non-reputable one as well. What I have found is that both term and whole life insurance are useful in peoples lives today.
Term is a great tool to cover a short term need (i.e. Mortgage Insurance, Debt coverage, the time untill the kids move out on their own) Whole Life insurance is a great tool to give someone coverage for things that last the lifetime (i.e. Final expenses, probate, capital gains, buy-sell agreement in a company) No single insurance product is a perfect product. As mentioned earlier, term premiums increase whereas Whole Life typically does not. But, the need for the coverage that term provides should decrease over time. (debts/mortages decrease over time and "hopefully" the kids move out).
I am not claiming to have all of the answers but I feel that we, as insurance professionals, have the obligation to look at each client individually and determine which product(s) will suit THEIR needs the best. When you do what is in the client's best interest the monetary rewards will come on their own.
Term is useful as is Whole Life. Don't go into a clients home with the mindset that you are only going to sell term or only going to sell whole life. Whose interests do you have in mind in that case?

RE: "THE TERMITE" (part 1)
Copyright 1997 Marsh Kaminsky CPA

In addition to the rebuttals from the educated professionals above, I have this to add:

How is it acting in the best interest of your client to have them pay for something that:
a) will increase drastically in cost as age increases, to such point where it will inevitably become UNAFFORDABLE (How does $800/month sound to you when you are in your 60s?).

Of course, every person I have ever talked to with these "great" term policies has had to pick their jaw up off the floor to tell me "they never told me that!" So naturally, and as planned by the insurance companies, the policy is forced to lapse due to the incredible cost.

And of course, with people advocating "Buy term and invest the rest" -- they are more concerned with padding their wallet, and not your best interest. Term insurance is not life insurance, but it gets them an easy comission and it is an easy sell to the uneducated on the subject, which is probably the majority of people.

So now I would ask you, do you plan to live a day past 65? 70? 75? Why, because depending on your policy, your insurance will terminate and there is nothing you can do about it. It is not up to you, and YOU are the one who has paid for it your whole life if you can even afford it up to that point.
Now my second question, How much do you have to show for this great term policy after all is said and done? ZERO. Your agent who sold you this either has no idea about the mechanics behind the insurance that he is selling, or genuinely believes that IT IS IN YOUR BEST INTEREST to spend around $75000 throughout the course of your lifetime for this Term policy and have absolutely nothing to show for it.

While he is sleeping on a large pile of money from the commissions and percentages from your investments, you can sleep on that - knowing that your money has been effectively thrown out the window.

A third question... It seems like every second person on the block has insurance for around $300,000 or so, but when was the last time you EVER heard of the family recieving the money?
Think about it...

So now, here you are at age 75, and any form of term insurance is cancelled - because they know you are going to use it- and you are left with nothing. Now on a fixed income, you have not the money to even come close to getting REAL life insurance (whole life) to take care of final expenses at a minimum, and of course to take care of the enourmous TAX BILL that you will have from all those investments that you die with. Better let your family know how good your planner was when all your gains get erased by your final taxes and then of course probate fees. In addition, your health may have gone down, and you may be completely uninsurable at this point. Thanks to your "advisor" who was looking out for you somehow, you are now on you own, and the company can give you a thank you letter for all the thousands of dollars you have literally given them.

Now some quotes from the original:
With the TODAY concept in mind, I ask another question. "If you
knew for sure that your spouse was going to die today, how much life
insurance would you carry on his or her life assuming that the
----------------------
premiums are EXACTLY THE SAME --
----------------------
$75,000 or $425,000?"
THIS ABOVE STATEMENT IS A LIE IN THE HIGHEST SENSE. Your intial premium may be the same, But 10 years down the road, lookout - of course, the will NOT tell you that.
----------------------------
It is, of
course, no great surprise when everyone quickly agrees that a
$425,000 policy is far superior to a $75,000 policy, especially if
the premiums are the same. I sometimes think that just by asking
those two simple questions, I could sell a billion dollars worth of
term insurance a year and still have time left to tend to my roses.
----------------------------
Well my comment again: I have one question for you Mr. Term insurance salesman, do you not think your company would be out of business if your term insurance actually paid like you say it does?
And maybe another: why dont you tell them the actual amount their premiums rise, and that if they live to see their 75 (or 70th or 65th) birthday, they have NOTHING?
Why? Why? Why? Because it would expose yourself and how term insurance really works.
And of course, that would not fatten your wallet.

----
One participant once piped in with, "Marsh, you just called the life
insurance industry a pack of thieves. That's uncalled for." I
replied, "Go ask Zelda what she'd call them. She's the one who is
missing $350,000."
---
Well- Sorry everyone, but thats why they have accident policies, that are very inexpensive, and pay a large amount. You add those to real insurance (whole life), so that when something does happen tomorrow, you will have that large settlement you need. Now when you are 75, you still have the insurance in fact until the very day you die, even if you are 150 years old, and your premiums are the same as they were the very day you got the policy when you were young.

Your homework, I challenge you to find me one good reason why Term should be used for life insurance, keeping in mind the best interest of our client's financial interests in life and at death. And of course, we know that life expectance is quite a few years higher than 75.

Good luck.

First off, let me say that I do work in financial services and have a deep understanding of life insurance and its functionality - but I am not in sales, so I don't have some blind bias to the industry - just an EDUCATED knowledge.

I won't digress into some lengthy diatribe, but I could not let this alleged CPAs comments go unrebutted. In short, this person preys upon unwary consumers who reflexively like to believe anything bad they hear about insurance companies, and would love to believe that term insurance is the anwer, since it's cheaper (BUT ONLY IN THE SHORT RUN).

Why don't you ask this genius how much term insurance would cost to Age 100? Answer - hundreds of thousands, and, you couldn't get it for that long anyway. Do you know when you're going to die? Most people don't either. In short, purchase as much permanent insurance (I would reccommend fixed UL vs. whole life or VUL - with some exception) as you can afford now. I continuously see people who are 60, 65, 70, or older who previously thought 'Oh by the time I'm that age I won't need insurance anymore' - and are in for a rude awakening.

If this person is really a CPA, they should have their licensed revoked for such ignorant advice and commentary. I would encourage you to contact an insurance agent from a reputable company - a vast majority of insurance agents are decent, hard working people who work for reputable companies. Come on - if this were such a fraud, do you think there would be insurance companies in business for over 150 years?

Because you obviously don't know a d**n thing about life insurance. There are such things as cash value policies, but if you go through a reputable company and take the time to read what it is you are buying, then you would not have to worry about buying some crap like cash value. Traditional whole life policies with a GUARENTEED DEATH BENEFIT pay off exactly what you expect them to. For example, if you bought a whole life policy with a GUARENTEED DEATH BENEFIT from a reputable company then it doesn't matter if you only paid into it for 5, 10, or 15 years you would recieve exactly the amount you were expecting, and if you bought it early enough in your life the actual death benefit, depending on the riders you added to it, might be actually more than say the 250,000 you are guarenteed.

For those out there interested in life policies that acumulate cash value, in my professional opinion, the best bang for the buck is an equity indexed universal life policy. If you are interested in term policies then make sure you add a return of premium option to it that way if you live longer than the term of the policy you will get back what you put into it.

Anyhow, CPA's should stick to accounting and let us REPUTABLE insurance professionals educate people on life insurance. I mean hey, you wouldn't find me teaching a class on how to make sure you get the most bang for the buck on charitable tax deductions or how to bend the rules on your write-offs. As for myself, I wouldn't be able to sleep at night knowing that I had sold somebody a policy that was a piece of crap. If that policy were to be needed one day and it didn't provide as the family expected, then all I would have accomplished is screwing somebody out of their hard earned money just to make a quick buck. Not to mention possibly forcing some poor family to make sacrifices that they otherwise wouldn't have had to worry about in such a difficult time.