Be good stewards of your treasure and your insuranceJuly 10, 2013
To the editor:
In the 1980s, well-intentioned people got caught up in a movement away from traditional whole life, or permanent insurance, in favor of “less expensive” term insurance. The mantra was: “Buy term and invest the difference” (the “difference” meaning the dollars saved by buying term instead of whole life).
The philosophy in and of itself was innocent (though often was not well executed). Unfortunately, some insurance agents, in practice, embraced a more aggressive position: “Whole life, bad; term life, good.” These salespeople made it their mission to replace as much whole life as they could with term. Some replacement artists even directed their clients to cash in paid-up, permanent insurance plans and buy term insurance that would someday run out. “Universal” life insurance policies also were sold as replacement alternatives to perfectly legitimate whole life insurance. Of course, class action lawsuits against these bad actors followed in the years to come.
Recently, someone I care about got some bad advice from a man at a financial seminar conducted at a local church. The seminar supposedly was based on scriptural principles. The man told my friend, without any personal analysis, to cash in his whole life insurance policy and purchase term insurance.
First of all, no one should ever cash in a policy until its replacement coverage has been issued, and then only after careful scrutiny of all the facts and implications. Second, do the math! My friend’s whole life policy had a cash value that, in a year, was scheduled to increase three times the amount he was paying in premium. That’s a 300 percent increase in one year! In today’s low-interest-rate environment, why would anyone give that up?
Last time I checked, the Bible admonishes and instructs us to be good stewards of our treasure. I’m no Scripture scholar, but I’m pretty sure that pertains to our insurance portfolios, too.
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