My articles rail against cash value/wholelife insurance in general.
There about about 3,000 ins. companies and they all sell the
garbage. I am writing against the whole industry, not one company
in particular. To single out one culprit, just lets the others off
"THE TERMITE" (part 1)
Copyright 1997 Marsh Kaminsky CPA
As a CPA veteran of six years as an IRS agent and 17 years in
private practice, I thought I knew it all -- that nothing could
surprise me. Then one day I got a call from a client who had some
pointed questions about life insurance I could not answer. Since my
tax and other financial books didn't provide answers, I went to the
library expecting to spend no more than an hour or so on this
research. After all, how much was there to know about life
The title of the first book I picked up, "What's Wrong With Your
Life Insurance" by Norman Dacey gave me a clue about what I was
about to learn. I then came across another book, "How Life Insurance
Companies Rob You" by Walter S. Kenton. I was learning that there
is plenty to know . . . that life insurance is a minefield of
As my reading progressed, I thought, "this can't be all true! I
don't believe it! " I had apparently bumped into a raging
controversy that I was unaware of during my entire professional
career. As a result, I stayed at the library the entire day and
returned for three more days the following week. The picture that
emerged was a miserable image of the life insurance industry -- it's
shoddy products, unconscionable profits, unbelievable political
muscle, and deceptive sales tactics.
My ignorance about life insurance really bothered me. As a CPA, I
believed that it was my job to watch over my client's financial
affairs. I was their mother hen, there to protect them against the
wolves. Sure, my six years as an IRS field agent may have taught me
how to smell a phony tax shelter scheme or tax fraud, but in this
very important field of life insurance, I was dumber than a brick.
As my reading continued, I began to have some very unsettling
thoughts about a client who had died a few years earlier of cancer,
leaving his widow and two small kids $150,000 from a whole life
insurance policy. My research taught me that for the same premium
dollar, his widow would have received an extra half million dollars
had I did this homework long ago. To this day, these thoughts still
make me cringe with guilt. My ignorance cost my client's widow and
children a half million dollars!!!!
WHAT'S THE PROBLEM?
In a nutshell, it's cash value insurance of any name, shape or form.
About 150 years ago some diabolical wizard in the life insurance
industry mated common term insurance with an investment feature. The
offspring of this mating was not an innocent cuddly baby. Instead
this creature was sneaky, schizoid, smelly, impossible to
understand, and ridiculously expensive to feed. More than that,
this offspring bore a remarkable resemblance to a piglet.
The insurance industry took this foul smelling piglet, gave it a
bath, drenched it in expensive perfume, disguised it further with a
respectable wardrobe, and then foisted it on an unwary and overly
trusting public. They even gave the creature a new name, changing it
from Porky to CASH VALUE.
Over the years this now fully grown sow has cleverly and
systematically bilked Americans out of billions of dollars, much of
it off the backs of widows and their children. To this day the
rip-off continues unabated, easily qualifying cash value life
insurance as the biggest financial swindle of all time. By
comparison, the recent savings and loan fiasco was a campfire weenie
Those days in the library opened my eyes -- angered me -- and forced
me to act. I decided to share my new found knowledge with my
clients and anyone else who was willing to listen. I quickly became
a dedicated "termite," (one who only advocates term life insurance).
Like real termites, I had a lot of "chewing" to do.
One of the methods I use to spread the truth about cash value life
insurance is to present seminars at continuing adult education
centers in the Chicago land area. Called "Winning The Life
Insurance Game," these seminars strip away all of the nonsense and
misinformation about life insurance and gives participants the hard
core facts they must know before buying life insurance.
People come to my seminars because they are confused about life
insurance. Most of them have already been subjected to a long and
polished sales spiel, accompanied by indecipherable computer
generated projections. They come to hear some straight talk, a
different viewpoint, from someone who is independent of the industry
and does not sell life insurance or any other financial products.
I begin the seminars by asking a simple question. "Is it possible
that you or your spouse will die today?" Whether death suddenly
occurs by a stroke, auto crash, or other means, everyone quickly
agrees that life today is no guarantee of life tomorrow. That
question quickly establishes the all important fact that life
insurance protection is an urgent TODAY need, not tomorrow's or
fifty years from now. TODAY! NOW!
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?" 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.
"Folks, this seminar is all about making absolutely sure that if you
die today, your dependents will have that extra $350,000." I then
explain in simple to understand English the difference between cash
value and term insurance, deliberately leaving aside confusing
technical jargon or incomprehensible sales hype that the insurance
industry loves to invent. Because I use the KISS principal, no one
leaves my seminars in the dark about life insurance.
"There are just two types of life insurance, term and cash value.
The only issue at hand tonight is which of the two is the best buy
"Term insurance is pure life insurance protection and is just like
an auto or homeowners policy. If you pay your premium and die, the
insurance company pays the face value of the policy to your
beneficiary. It is available to age 90 and can be purchased yearly,
or on the basis of a guaranteed level premium for five, ten or
twenty years. The product is uncomplicated, easy to understand, and
very inexpensive. The premiums increase as you get older.
"Cash value life insurance (sold as whole life, endowment, variable
life, endowment, variable life, universal, permanent, straight life
and a zillion other names) is the second type of life insurance. It
differs significantly from term because there is a savings or
investment feature attached -- the cash value. You will soon learn
that the cash value is the bad guy that causes all the trouble.
These policies typically last to age 100 and the premiums remain the
same during your entire life."
Next comes a discussion of why no one, under no circumstances
whatsoever, should ever purchase any form of cash value life
"You all now know," I begin, "that cash value life insurance is a
combination of insurance protection and an investment. But you
should also be aware that this investment element causes cash value
to cost anywhere from FIVE to TEN TIMES as much as the same amount
of term insurance. Because cash value life insurance is so
expensive, most Americans are severely under insured. They simply
cannot afford all the coverage they should have. This is the major
failing of this type of life insurance. If tragedy strikes and the
insured dies, the beneficiary is left with peanuts instead of big
dollars. I am here tonight to make sure that this does not happen to
"Listen up folks . . . here is a hypothetical example that I hope
"Take two families with the husbands both earning about $40,000 per
year. Both are married, have two children, and own similar homes.
Jack and Scott are friends and live in the same neighborhood. They
drive together to work every morning. One day disaster strikes and
they are involved in a head-on crash with a drunk driver. Both are
killed instantly, thus ending all their worldly problems. But for
their spouses and children,
their problems have just begun.
"About five months ago both men were smart enough to buy life
insurance to protect their families in the event of their premature
deaths. Jack purchased a $75,000 whole life policy which had a $500
annual premium. Scott purchased a $425,000 twenty year renewable
term policy for the same $500. The result?
"Zelda, Jack's widow, had to go back to full-time work, sell her
home, and pull her kids out of nursery school. Her life was in
"Jane, Scott's widow, with an extra $350,000 in her bank account,
didn't have to sell her house, paid off the mortgage, and still had
enough left to provide for her children's college educations and
still maintain a reasonable standard of living. Life was now no bed
of roses without her husband, but at least she did not have any
severe financial pressures to make things worse.
One widow had to struggle mightily for years . . . and the other did
not. Then I literally shout, FOLKS, THIS IS THE CURSE OF CASH VALUE
"Whoever sold Scott his life insurance policy knew the only thing
that really counts in life insurance is the size of the insurance
check that the beneficiary receives if disaster strikes. NOTHING
ELSE MATTERS. Every other consideration is an illusion, total
"Let me put it this way, whoever sold Jack his policy literally
robbed Zelda and her children of $350,000. That's more than a third
of a million dollars!" No one ever smiles as this sinks in.
Somebody always asks, "Why didn't Jack buy a $425,000 term policy
too?" And my answer is, "probably because his agent never told him
about it." Unfortunately for Zelda, Jack got his priorities mixed
up. The agent mislead him by stressing the long term investment
feature of cash value life insurance instead of Jack's urgent life
insurance need TODAY. That bit of chicanery robbed his family
I continue to pound on this theme. "How do you think Zelda feels
knowing that her friend ended up with a third of a million dollars
more than she did? Do you think that it makes her feel any better
to know that her husband was saving for the future? FOR HER, THE
FUTURE IS RIGHT NOW!" By now, the Zelda story is making everyone
very uncomfortable. Lots of frowns.
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
end of part 1