Life Insurance's Hard Sell

Over the past week, I’ve received quite a few questions regarding term vs. permanent life insurance. It’s an important topic that I will cover over multiple blog posts. For this entry, I want to focus on how to avoid the ‘hard sell’. Life insurance is a critical part of your financial plan and it's perfectly acceptable to take some time to make a smart choice.

The insurance industry is notorious for hard selling permanent life insurance because 1.) you can make a compelling case to anyone and 2.) they generate some of the highest commissions in the business. Don’t get me wrong, permanent life insurance, also known as whole life, universal life, variable life, makes sense for a small group of people. Still, the industry tries to sell it everyone. Here are a few approaches salespeople use to hard sell permanent life insurance (and my response to each):  

• Don’t throw your money away – permanent insurance gives you life insurance and an investment. How about a savings account with your homeowners policy?  Sounds silly right.  Insurance is to insure and, while the investment feature may seem attractive, it comes at a high cost.  For the same death benefit, your monthly premium will be 5-10x higher on a perm vs. term policy. The extra money is going into an investment account. You can do the same thing by buying term (the lower cost option) and investing the difference.
• You will no longer have insurance at the end of the term. That’s the point. Life insurance helps you get through a period of time when you’re building your nest egg – it is not the nest egg itself. If you buy term, save aggressively throughout the term so you’re prepared when it’s over.
• Insurance will be expensive when you’re older. Yep, that’s true. But, your insurance needs should go down as your kids are independent and you’ve saved (we hope).
• This policy will force you to save. Products will not change your behavior. If you don’t save now, you will likely lapse on the perm policy and lose everything you put in. (about 40% of permanent life insurance policies lapse)
• The investment is guaranteed. First, read the fine print as there are often exceptions. Second, the investment only pays if you hold it for a minimum period of time. If you walk away before that time, you may be left empty handed.

I’m sure there is an entire ‘situation/response’ book that life insurance salespeople memorize to get your business. I’ve met some great agents that focus on your needs and others that only care about their commission. You never know what you’ll get. To avoid frustration, always check with at least 3 sources before you select the best insurance for your needs.

What else? What is your experience with life insurance salespeople?   Which other ‘hard sell’ tactics have you seen?