You’ve seen the headlines on LinkedIn and/or Twitter. 14 Reasons Why You’re Tired All the Time. 5 Tips From a Gold Medalist That Will Power Your Success. And countless others. Perhaps you’ve even clicked on them occasionally.
But you are usually disappointed. Why? Because the content was lacking. The headline was written to try to get you to click on it, but the underlying article didn’t deliver. It is for that reason that I’ve stopped clicking on such headlines. Unless they involve life insurance.
So of course I had to click on 5 Things Insurance Agents Say To Sell You Whole Life Insurance, which appeared on the Huffington Post last Friday. The headline implied, or at least I interpreted it as such, that agents would say anything to get a person to buy whole life, even if it isn’t true. Much to my surprise, four of the five things are true statements, and the one that isn’t true is not an egregious lie. Let’s review them one by one.
You can use a whole life insurance policy to supplement retirement savings. Nothing nefarious about that statement. The cash value of a whole life policy can be used for anything you choose, including a down payment on a house, a college education, a vacation (not a good idea) or as a retirement supplement.
You won’t lose money if the stock market tanks. Again, true. The cash value in a whole life policy never goes down unless borrowed upon. This is not true of other types of cash value policies, such as variable or universal.
Everybody should have at least some permanent life insurance. The one non-true statement. If an agent actually says that to you, you shouldn’t buy just on principle. One size never fits all.
A whole life policy is a great gift for a child. Absolutely a true statement. Premiums go up with age, and future health is not guaranteed.
You can earn dividends to increase the value of your whole life policy. Again, a true statement. Policies issued by mutual companies receive a portion of the companies' earnings in the form of dividends.
The article correctly points out that dividends are not guaranteed, but fails to mention that some of the better companies have paid dividends for over 100 years. The article also doesn’t mention the fact that because the IRS has deemed the dividends to be a return of premium, they are tax free until they exceed the basis in the policy.
The article also contains one of my pet peeves, which is “talk to a financial advisor who doesn’t make commissions on product sales.” There are several flaws in that advice. First, advisors who don’t make commissions charge for their time, which is never mentioned. Second, not all advisors understand the intricacies of life insurance. CPAs and attorneys regularly call me with questions about life insurance.
But most importantly, that advice implies that advisors who earn commissions are trying to screw you, which of course isn’t true. You either have integrity or you don’t. If you have it, how you’re compensated doesn’t matter. And if you don’t, well, how you’re compensated doesn’t matter.