The main problem with life insurance is that it is too confusing. Therefore, there are a lot of people who don't know enough about life insurance to make a good decision or even create a decent quote. Yes, there are people who need to sharpen their skills on both sides of the life insurance equation. The purpose of this bog will be to convey my life insurance know how by commenting on when other people get it wrong.
Sure, it may seem like I am flaunting my superior life insurance skills, but I think it is self-less that I would my time to tell the world what it is doing wrong. Change the channel if you don't like how right I am.
To make things interesting, I'll start by pointing out some reporting flaws in none other than the Toronto Star. The author writes that Insurance scrimping can end up being costly. Lengthy title aside, there are a few problems I noticed going through this article.
One of the main problems plaguing this article is that it is written for a respectable Canadian newspaper, yet they can't seem to find any Canadian statistics. All the life insurance facts and figures are from US sources.
Just because US viewers watch Canadian design shows does not mean our life insurance markets mirror each other or have the same problems. I ate Indian last night, but I'm not about to pull figures from their census to talk about problems here.
The next big problem is that the author states universal life insurance policies "allow the policy owner to invest cash reserves in the stock market." Um, wrong. Why a journalist (and I use this term lightly) who gets these kinds of material facts wrong allowed to write about life insurance? I don't know.
The fact is that universal life insurance lets the policy owner put excess cash into internal accounts. Very often these accounts credit a fixed amount of interest declared at the beginning of each year. In case this "universal life insurance policy" is actually "variable universal life", that account contains sub-accounts, which may act similar to mutual funds.
The word "reserves" in life insurance is also a very technical one, which I might drop some knowledge about later on. Needless to say, there are better choices to call money that goes beyond the basic cost of mortality and administration costs for a particular year.
Finally, there are other ways to "invest" in life insurance (although I don't really recommend any of them) besides relying on a dividend. The author basically points out a trade-off between perceived stability and reward at the end without acknowledging it. Furthermore, because no life insurance company can guarantee dividends and it may be here today and gone tomorrow, investing in life insurance for a dividend represents a kind of business risk that should be taken into account. Oh, and I should mention a life insurance dividend is an overpayment of your premium, so comparing it to a percentage return on an investment is kind of twisted.
Overall, this article was shallow, said nothing new, and contained misinformation. Way to go. It looks I have it easy - giving you the life insurance know how.
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