So maybe I am over thinking this BUT yesterday I saw a young man post on Facebook that whole life and A.D. & D (cash value products) were trash and he would never recommend it for anyone. Well it perked my interest so I thought well maybe this guy doesn’t know how either works and why all term, whole, and accident life insurance is all good for very different reasons. Plus who doesn’t like something to have cash value?
Whole (permanent) life insurance:
If you do not know a Whole Life Policy is a policy you can purchase and you pay your fixed premiums until you’ve met the face value.
For example if you take out a $20,000 policy that requires you to make payments for 15 years once you’ve done that your paid in full and no longer have to make payments for the policy and it pays out its full face value to the beneficiary upon death of the person its written on. The fixed premiums that is paid in also accrues a cash value and earns interest although at a low rate.
If you take out a whole life policy today and die in 6 months your beneficiaries will receive the full face value of the policy.
But say you’ve paid in your fixed premiums for the last 5 years, and you find that you need to replace your hot water heater in your home. (Those sweet babies of yours can’t go with out hot water!)You have the option to take a loan (interest free) against your whole life policy up to its cash value.
I generally recommend whole life to younger people its normally cheaper due to their age and as long as they are in good health. It also locks in their rate for the life of the policy. So if you are 25 when you start your policy then then you will still being paying a 25 year olds rate at 35. Once the policy reaches maturity the cash value can also be used as guaranteed income after retirement.
Term life insurance:
With term life its just that it only pays out if death occurs during the policy term. Now don’t get me wrong term life is a great product, you can generally purchase a term life policy and have a larger amount of coverage for your buck. You can obtain policy terms that can lock in a rate for 10 to 20 years with most having an option to convert the term policy into a whole life policy later.
Many employers offer term life insurance as a added perk to their employees but it is still age banded and generally is a guarantee issued policy. Which is great for people who other wise wouldn’t qualify for a traditional life policy out side of their work benefit.
If you purchase a life benefit from your employer then expect the rate to increase every renewal and no conversion option to whole life. (If you stop aging and have found the fountain of youth please share it will be our secret!!!) The Term life premium you pay does not build any equity (cash value) like the premiums paid on a whole life policy eliminating the option to borrow or use your cash value for retirement.
Accidental death & Dismemberment:
Accidental Death & Dismemberment is exactly what it sounds like if some dies in an accident like a car crash then it pays out up to the limits of the policy. It pays if you lose your hearing, sight in one or both eyes, a limb, finger or thumb. Dismemberment has set limits stated out in the policy. This type of coverage can be written as a stand alone policy or as a writer (add on) to a life policy.
Why do you think that?
But back to the real reason I’m writing this blog. The young man stated it was trash exact words being “cash value rhymes with trash value” I asked him why he thought that and never got a straight answer but I gave him the facts of why all policies are great for different reasons. As I continued my teaching moment it dawned on me how un-in-the-know. He was under the impression you had to lose two of something for A.D & D coverage to pay out. He sees no value in whole life, seems to think there is no value in anything that produces a cash value now or when someone dies. (Although they are helping families gain financial freedom and their company provide financial services) I suppose I couldn’t wrap my head around why you would 1. consider yourself an insurance expert and not know some of the most basic concepts of the products. 2. Why you would limit your opportunities to cross sell to your clients
So as I probed him for more information and looked over his online profile, I find out he’s a recent High school graduate and because i’m EXTRA nosy I do a search in public data and Texas Department of Insurance (TDI) to find out if he or his wife is in fact insurance licensed at all…. THEY ARE NOT!
Hooked on the line:
I probably would have never thought twice of their post but just the day before his wife messaged me in a very shady manner asking about how we could help each other to get referrals. She asked what I did I shared I was an independent insurance broker. She informs me that her husband and her were both in insurance sells also and just opened an office.
Well hell if my curious side didn’t get the best of me, I had to know more. I asked “What products do you sell and what company represent.” I now wish I’d not invested to much interest but i was like a fish and was hooked, maybe this was my afternoon entertainment who knows. But I was told they represent PFS. I’m really scratching my head, racking my brain of all the companies I knew and I’m coming question marks.
So I do what anyone else would do I googled it. I sorted through the junk and obvious non-winners. I knew they didn’t cash checks or in the pawn shop business. Then BINGO! I found a link discussing PFS or Primerica.
What I Know About PFS:
Now I’m not saying Primericas doesn’t sell legitimate term life products. BUT there was something smelling fishy about this group. I couldn’t understand why she was being so secretive at first until I outed their company to her which is very much like the structure of Mary Kay or Avon. The person on top gets the loaf of bread and the crumbs trickle down to the bottom. Not in a Jesus kind of way either.
They will deny it, but it’s your traditional multilevel marketing company and distributor of financial products to middle income families in North America.
The business opportunity includes the sale of term life insurance, mutual funds, variable annuities and pre-paid legal services.
To become a Primerica representative, you have to pay an IBA fee of $103.95 that includes sales taxes and you’re also encouraged to pay $28 per month for Primerica online.
Once you’re ‘hired,’ you are told to write a list of your ‘warm market’ that consists of your friends and family so you can immediately start recruiting them which can then duplicate the process. Representatives put a strong emphasis on this as opposed to finding their own customers.
Reps are then required to take a brief class to become life insurance licensed and are told that their fee will be reimbursed.
They are given a script that will be used to persuade their friends and family to meet up with them and their upline for a presentation to turn them into customers.
Primerica representatives are independent contractors that solely get paid minute commissions through the sale of any of these financial products with some of the profits passed up to their upline.
I have been to their meetings before and they have a way of convincing people that this is the best opportunity ever, that just by making a few sales per day and attaining just a few customers on a part-time basis, within a year or two you could be earning a six figure income and can spend your days playing golf and still be earning money.
They explain how you eventually will have the ability to leave your job in which they explain stands for ‘just over broke’ and become your own boss so you have the freedom to travel and spend more time with your family.
But in reality, they stay in business by taking advantage of undereducated and low income people.
With all that said my biggest concern is the miss information they spread. I am all for talking up the company you represent. But I find it reckless and irresponsible to discredit one product for another with lies. Every product is structured for different situations. What works for me may not work for you. Someone also limits their selling options to their clients when doing so.
The New Guy:
I soon got the response from another person (I’m assuming this is the person who persuaded them to join) asking if I hold any investor license.
I’m again scratched my head and thinking, “What does financial services or stock trades have to do with the conversation.” We are not discussing annuities or varible rates.
For full disclosure I do not offer financial services at my agency. But if you want to meet with someone I can refer you to some very talented financial planners! I’m general lines licensed P&C, life and health agent. I have no need for a stock brokers license.
This other gentlemen informed me I am only interested in selling as many products as I can to my clients vs. him helping his clients build financial freedom. But remember I said I’m nosy, this individual hold neither a insurance license or any form of a investors license. I say this because a person with a great licensed financial adviser could help a person gain “financial freedom” but this wasn’t the topic of discussion.
The Topic of Discussion:
How in the hell does Term life insurance create financial freedom? The answer is it doesn’t it is a product that pays out to the beneficiary when the person it is wrote on dies during the policy term period. Life insurance or all insurance for that much is not a product designed so that someone gets rich or gains “financial freedom” it is to make the person whole again after an accident has happened.
No different then when you wreck your car as long as your auto insurance is enforce with the proper coverage your car is covered and repaired. If it has lapsed then the your car and the damaged you caused isn’t covered and you’re S.O.L.
I worry for any clients they may have spilled their garbage to on social media of how they are helping families but they discredit one service to another because they do not offer it. Whether their product could help or not social media gives a lot of exposure to some of my mutual clients, friends, and family which frustrates me more.
My job as an insurance broker is to educate, listen, and help my clients. I take that roll seriously I strive to make sure you understand what your purchasing and the benefits it provides. I didn’t decide to work in insurance to get rich I decided to get in insurance to help people and in return helps my family. Whether your my client or not and you’re just needing some clarification on the inner works of your insurance policies feel free to contact me I would be happy to help you in any way I can.