The BLACK box of Life Insurance
Hint:
Why do you think sales illustrations for cash value policies run from 15 -30 pages? Do you think these illustrations are for your benefit or the insurance companies benefit? Whose lawyers wrote these complex illustrations? They tell you about the black box and yet many consumers sign them without understanding that what they thought would happen will not happen, unless ...
The sales illustration shows you the complexity of the product and is a legal document that tells you every way and every reason why something else may happen. This presentation also tells you that this document supersedes the sale pitch you will be given. Salespeople know how to speak around the disclosures, which clearly state that all numbers are based on assumptions, “what if” scenarios and possibilities.
Term Life (Most basic)
Growth model: Does not accumulate cash value.
Primary purpose: Death benefit protection for a specific period of time.
Sales pitch: You can convert it to a permanent policy down the road.
Whole Life (Most conservative)
Growth model: Annual company declared dividends based on company profitability, not stock or bond market.
Primary purpose: Permanent paid up life insurance by retirement.
Sales pitch: Bond equivalent investment with tax free returns through borrowing.
Universal Life ( Most flexible)
Growth model: Annual company declared interest earned by insurance company, not stock or bond market.
Primary purpose: Flexibility of payments
Sales pitch: Cheaper than Whole Life.
Indexed Life (Most balanced)
Growth model: Earnings growth based on stock market indices.
Primary purpose: Upside growth potential more conservative than variable life and more aggressive than whole life.
Sales pitch: No downside risk.
Variable Life (Most aggressive)
Growth model: investment portfolio you manage.
Primary purpose: Leveraging least amount of insurance with most premium allowed.
Sales pitch: Better investment than other insurance contracts.
Conclusion
Every sales pitch has enough truth in it to make the message plausible. Full time insurance salespeople will always be more qualified to sell to you than you ever will be qualified to be a sophisticated buyer. The life insurance industry knows this and trains their salespeople accordingly.
The person you choose to trust with your life insurance purchase decision may turn out to be a more important decision that the company and type of policy you buy or are sold by a life insurance sales representative.
Why do you think sales illustrations for cash value policies run from 15 -30 pages? Do you think these illustrations are for your benefit or the insurance companies benefit? Whose lawyers wrote these complex illustrations? They tell you about the black box and yet many consumers sign them without understanding that what they thought would happen will not happen, unless ...
The sales illustration shows you the complexity of the product and is a legal document that tells you every way and every reason why something else may happen. This presentation also tells you that this document supersedes the sale pitch you will be given. Salespeople know how to speak around the disclosures, which clearly state that all numbers are based on assumptions, “what if” scenarios and possibilities.
Term Life (Most basic)
Growth model: Does not accumulate cash value.
Primary purpose: Death benefit protection for a specific period of time.
Sales pitch: You can convert it to a permanent policy down the road.
Whole Life (Most conservative)
Growth model: Annual company declared dividends based on company profitability, not stock or bond market.
Primary purpose: Permanent paid up life insurance by retirement.
Sales pitch: Bond equivalent investment with tax free returns through borrowing.
Universal Life ( Most flexible)
Growth model: Annual company declared interest earned by insurance company, not stock or bond market.
Primary purpose: Flexibility of payments
Sales pitch: Cheaper than Whole Life.
Indexed Life (Most balanced)
Growth model: Earnings growth based on stock market indices.
Primary purpose: Upside growth potential more conservative than variable life and more aggressive than whole life.
Sales pitch: No downside risk.
Variable Life (Most aggressive)
Growth model: investment portfolio you manage.
Primary purpose: Leveraging least amount of insurance with most premium allowed.
Sales pitch: Better investment than other insurance contracts.
Conclusion
Every sales pitch has enough truth in it to make the message plausible. Full time insurance salespeople will always be more qualified to sell to you than you ever will be qualified to be a sophisticated buyer. The life insurance industry knows this and trains their salespeople accordingly.
The person you choose to trust with your life insurance purchase decision may turn out to be a more important decision that the company and type of policy you buy or are sold by a life insurance sales representative.
