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Author: TTRoberts Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76236  
Subject: Re: All Life Ins. is Term Insurance Date: 2/11/2004 11:39 AM
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telegraph, askes:

<< You're trying to tell us, that for the first umpteen years, you pay in extra, out of taxable dollars, and let the insurance company invest it, at below market rates, to fund your insurance partially later? >>

They don't invest at “below market rates.” In fact, because of the size of their investments, they can actually get better deals on their investments than individuals, which results in higher returns.

<< Heck, you could just as easily invest it in a tax friendly mutual fund, or your own IRA, and do a lot better. >>

If one can actually do “a lot better,” then one should buy yearly renewable term and do just that. (what ever “better” might mean)

<< Many people who get suckered into whole life at 25, with 30 or 40 year term, often don't need the life insurance after the kiddies are gone,

After the kiddies are gone, there may be other issues to address . . . . or for many, they may never be gone due to some special circumstances.

<< or if they already have a nest egg of multi=millions...it is simply a big drain on their income, with little return. >>

For a great many who've reached such of affluence, my experience over the last 30 years has shown me that they find it's a very useful tool and not a “drain” on their income at all. In many cases, it doesn't even affect income.

<< Anytime there is a middleman (or lots of them in the case of life insurance), they are going to take their cut, and take it each year. Now, just how much does a life insurance salesmen get each year? for at least the first five or ten years? Is that why many life insurance salespeople can essentially retire after 15-20 years collecting the residuals on all the pollicies they have sold? >>

Life insurance salespeople don't get much in the way of “residuals” or trails (renewal commissions). If they would get as much as P&C agents, their book of business what have some resale value in the same way. But that's not the way life insurance is set up. And the life insurance agent much continually sell product in order to produce enough income and like other's must set up and contribute to a retirement plan to retire.

Yes, there is great potential for make very good money . . .just as it is in many other industries. But most life insurance salespeople don't make all that much as it's a very difficult job and a long process of education and understanding how life insurance works.

Cutting out the salespeople doesn't help much in the case of life insurance, if at all, in reducing the insurance company's expenses. Since life insurance is something the few people like to think about, it takes heavy marketing of some time in order to sell it. You look at those life insurance company's products who don't use salespeople, you'll find that their products tend to be a little more expensive. There's always a marketing cost and just where the insurance company puts their money depends where that money be more efficient.

<< Most folks get life insurance through work. It is term. Part is often paid for by the company, and the rest is available at very low group rates. >>

While group life insurance is indeed quite available through many employers, group life insurance rates actually tend to be higher than what can be bought separately by those who are in good health. Group life coverage has particularly good rates for those who's heath history doesn't allow them to purchase life insurance at a good rate otherwise. If you're young and/or in good health, looking for an individual life policy outside of group coverage will most likely cost you less (one should definitely shop and compare).

Also, depending on group life insurance for NEEDED life insurance can wind up a very big disaster if one cannot afford to convert all the need coverage if one should lose their employment or the employer decides to cut expenses and limit what they'll offer.

<< Many singles get the pitch to 'sign up young'. For the 1/3rd that don't get married, or stay married, it is a total waste. >>

. . . .apparently so, in some people's opinion.

<< Life insurance is an oversold product, often mis-sold, and wrapped in all sorts of 'mystery' to sucker in gullible folks with scare tactics in many cases. It's marketing. >>

Life insurance may indeed be “oversold.” But does such a fact make it any less useful?

Yes . .. life insurance is often “mis-sold.” But does that fact make it any less useful?

Yes . . . life insurance tends to be a “mystery” to people. Who's teaching people about it so that it's not such a mystery. Though I try my damndist, there's always those who just don't listen. (such is life <sigh>)

And yes . . .there's a lot of “marketing” just like there is in any industry.

<< A lot of insurance policies sold 30-40 years ago, after inflation, are essentially teeny weeny things ....with the 15% inflation in the early 80s, you would up with $10,000 equivalent life insurance....v >>

Hmmmm??? And what does this say about the idea that the amount of life insurance needed declines over time???

33 years ago I was married and intended to start a family and bought a 4-bedroom house with a mortgage of $26,000. 15 years ago I bought a 3-bedroom house with a $225,000 mortgage. I remarried and started a family 17 years ago. I recently built a new 4-bedroom home with a mortgage of over $800,000. Would this suggest my need for life insurance has been declining??? Except for the high priced area I live in, I don't think this kind of thing is very different than most people.
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