Thursday, February 02, 2012

Friends don't let friends buy whole life

Why is whole life insurance a bad deal? Let me count the ways.

First, the fees are very high, so they may say things like "Guaranteed 6% return." Just ask if that is after fees.

Second, the cost of the term insurance is overpriced - it is basically a hidden fee. Quote term insurance separately at AccuQuote or SelectQuote or Zander (Zander doesn't even ask who you are) and see. Then consider the difference a hidden fee.

Third, if you die before your savings exceed the face value of the insurance, they keep all the savings. Talk about a lousy term insurance deal.

Fourth, if you die after your savings exceed the face value of the insurance, you only get your savings - what happened to the term policy you continued to pay for out of your earnings? It was still in effect until you get too old to insure. So you are paying an insurance for the insurance company to make more money off of you.

So what if your friend sells life insurance, but you aren't sure what to do? So you ask another friend. But what if the seller of the life insurance is a mutual friend? Will you get an honest answer? Think about it.

So if you check a reference, sometimes a friend, someone you trust, will be less than candid, because he has a conflict of interest. Always keep your eyes open.

No comments: