Beware of Permanent Life Insurance Salespeople


Term life insurance is a low cost and simple way to provide security for your family and loved ones in the event of your untimely passing. Term life insurance provides insurance protection for a low premium for a set duration. The goal is to live a long and healthy life and never receive the insurance proceeds.

The commissions on term life insurance are relatively low. As a result, all too often we see insurance salespeople pushing permanent insurance. Permanent insurance commissions are outrageous, and the premium payments are significantly higher than term life insurance. The most popular forms of permanent insurance are Whole Life, Indexed Universal Life, and Variable Universal Life.

Whole life insurance provides coverage throughout the life of the insured person. In addition to paying a tax-free death benefit, whole life insurance also contains a savings component in which cash value may accumulate.

Indexed Universal Life is a permanent life insurance policy that ties a portion of your premiums to stock market indexes like the S&P 500.

Variable Universal Life (VUL) combines lifelong insurance protection with flexible premiums and cash value you can access while alive. VUL insurance lets you invest and grow the cash value through subaccounts that operate like mutual funds.

While there are situations where these permanent insurance products may be appropriate, most people do not need permanent insurance. Some of the drawbacks of permanent insurance are as follows:

Cost: The main downside of having a permanent life insurance policy is that it typically costs much more than term life policies. Many people do not need coverage past a specific time frame, so buying an option that can be converted in the future if additional protection is needed often makes more sense financially.

Possible policy lapse: If you miss a payment or can’t afford payments, your policy could be canceled. If it’s canceled, you may need to buy a new policy. That would mean starting over and paying more for the new policy.

Not Convertible: While a permanent life insurance policy can be beneficial in terms of the lasting coverage it provides, it also has drawbacks. If you discover that you don’t need such long-term protection anymore, all the money already paid into premiums will have been wasted, and your investment will be gone forever.

Cash Accumulation Myth: Many investors are sold on these products because they accumulate a cash value that can borrowed against. Unfortunately, the cash value takes a significant amount of time to build.

Poor Investment Performance: The investment options in permanent insurance where assets are invested typically underperform market indices. Investors would be much better served owning term life insurance and investing independently.

All too often we see investors that were sold expensive permanent life insurance with undisclosed commissions. Life happens and investors need access to premiums paid. The cash accumulation is usually a fraction of what was invested, and liquidation usually results in an investment loss and coverage loss. Permanent insurance is a long-term commitment that usually is most beneficial to the insurance salesperson. Consider your options before making a lifetime commitment that usually can be met with a straight-forward and affordable term life insurance policy.

Vernon Litigation Group is based in Naples, Florida and has been successfully representing clients throughout the United States for decades. Contact Vernon Litigation Group at (239) 319-4434 or visit us online to speak with an attorney today!

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