UNIVERSAL LIFE INSURANCE – REALLY?

By in Insurance | 11 comments

WOULD YOU BUY A FINANCIAL PRODUCT FROM AN UNSHAVEN GUY IN SHORTS AND A TEE SHIRT?

I am biting my tongue as I sit across from a guy in gym shoes, shorts, and a tee shirt selling a universal life insurance policy to a 29 year old single guy at Starbucks. Is this the right investment for him?

universal life insurance pros and cons

What is Universal Life Insurance?

“A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup.  Universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.” Investopedia

There is so much wrong with this picture, I don’t know where to begin.

DO YOU NEED LIFE INSURANCE?

This is easy, do you have someone depending upon your income? If you have kids, dependents, or a special situation that will be financially impacted if you die, then you need insurance.

If you have no kids or anyone depending upon your income for their survival, then you do not need life insurance.

The guy filling out the life insurance paperwork was unmarried with no kids and barely opened his mouth during the entire transaction. I held myself back from chiming in. At the very least he should have asked a question or two.

If you have dependents, you need life insurance. In most circumstances, the most affordable type of insurance is term insurance. Pay a set amount each year (or monthly) and in return you get insurance which is paid out to your survivors upon your death. Plain vanilla, low cost, life insurance.

WHAT’S WRONG WITH UNIVERSAL LIFE INSURANCE?

High commissions to the sales agent are the first thing wrong with universal life insurance (for the purchaser). Combining two different products into one package; investments and insurance is another. Both products are cheaper and easier to manage if purchased separately.

Some folks may benefit from universal life insurance, but in general it’s a good idea to separate insurance from saving and investing. It saves money in the long term and gives you more investing flexibility.

WOULD YOU GO TO A BUSINESS MEETING IN SHORTS AND A TEE SHIRT?

Maybe I’m out of touch….. But when I’m selling something or trying to make a professional impression, I dress professionally. I’m not suggesting the guy should have worn a suit, but some pants and polo shirt would have been alright. Is it too much to suggest the salesman should shave?

I understand that over the decades, casual attire has become more popular. Many of my university colleagues teach in jeans. When I watch old movies from the 1960’s I smile at the ladies in their white gloves, heels, and dresses accompanied by the men in suits and hats. I’m certainly not recommending a return to those formal times. When I come home after work, I throw on a pair of sweat pants.

Men, before attending a business meeting, pull out your razor and long pants. Women, put on a nice pair of slacks and a blouse with a jacket. Although the slob in Starbucks made a sale, I don’t think his shorts and tee shirt are going to win him any awards.

What you wear, how you look, and how you carry yourself speak volumes about your credibility. Okay, Mark Zuckerberg, CEO of Facebook can get away with wearing a hoodie, but unless you are CEO of a major corporation, dress up a bit. You’ll garner more respect, and feel better about yourself.

What do you wear to work? Would you buy insurance from a slob?

 image credit; google images_tumblr

    11 Comments

  1. I’d have to agree with you. I think life insurance is really only a good option when you have dependents or people who rely on your income. I know there’s a retirement (I don’t want to say scheme, but…)scheme that claims if you invest in universal life insurance as a retirement plan, you make more in the long run than a 401(K). I don’t know how it all works, but I wonder if that’s what the man in the shorts and T was pitching.

    Little House

    December 14, 2012

  2. Very well said Barb. I worked in the life insurance industry for five years and always marveled at how Universal coverage was sold. In so many occasions, term is the way to go. In terms of attire, I would agree as well. I know it’s losing popularity, but when I am meeting with someone I dress up. Thankfully now that we run our own business it’s few and far between, but when I have a business meeting I look my best. I’d much rather overdress my meeting partner as opposed to looking like a slob.

    John S @ Frugal Rules

    December 14, 2012

  3. The only time it doesn’t matter how you are dressed is when you know the person such as a friend. A pair of khakis and a polo shirt would have made a positive impression. A good sales paerson matches the customer needs with a product vs. just satisfying the sales person’s needs to sell a product. Let the buyer beware!

    krantcents

    December 14, 2012

  4. Absolutely agree with you on the attire and also on your interpretation of who needs term life insurance. In any case, the golden rule apply – there is no “one size fits all” solution. Each customer’s case needs to be evaluated separately and the most appropriate products offered.

    Timothy Mobley

    December 14, 2012

  5. I bought a universal life insurance policy when I was 25 and single. I still pay into the policy regularly.
    I locked in low rates for a permanent policy that builds cash value.

    A term policy is cheaper, but my daughter wants to go to medical school – and even a 30 year term policy purchased when my fist child was born would reprice just as med school expenses were heaviest. Of course the policy will be far more expensive (if I am healthy enough to get a policy).

    My best friend had prostate surgery last year. His term policy expired, and now he can’t get a new policy. I could go on.

    Kevin@ Growing Family Benefits

    December 14, 2012

  6. @Little House- I don’t think you’re remiss in calling it a scheme. In most cases, simple is better, and that goes for investing and insurance.
    @John, It certainly is losing popularity to dress up, but I think your credibility improves when you look more professional.
    @Krantc-I like the idea of matching the product with the buyer and looking neat in khakis and a polo shirt gives a great impression in this type of situation.

    Barbara Friedberg

    December 16, 2012

  7. @Timothy-It is definitely important for each individual to look at their own situation and consider what solutions work for them. In fact, there are few absolutes in life, we each have our own scenarios.
    @Kevin-Thank you for writing in. Your examples highlight the reality that there is no one right solution for all, as I mentioned to Timothy. Frequently insurance is promoted to those without dependents in case they can’t qualify for a policy later. In that situation, you have to weigh the probabilities, your family medical history, and financial situation. I always recommend speaking not with a salesperson, but a non biased fee based financial adviser to learn the advantages and disadvantages of each insurance and investment product.

    Barbara Friedberg

    December 16, 2012

  8. Barb, You are right on the money. I am ceaselessly amazed at those who buy Universal Life insurance. I am even in disbelief that such a ridiculous product still has demand!

    Shilpan

    December 16, 2012

  9. Universal Life is too expensive for the value. I can’t think of any reason to ever recommend it. Perhaps for people who are well-off, Whole Life can be a convenient option to insure a business partner or loan, bequeath a charity, pay estate taxes, or leave a legacy to heirs.

    But that is not most people. the typical profile of a term life insurance owner is someone who is a family breadwinner and has minimal savings. It is critical protection. If you are in this category and aren’t insured, get insured now!

    Advantages of Term Life Insurance are: totally affordable, and ideal for younger families when the need for protection is greatest.

    Choose Term Life Insurance for covering specific needs that will disappear with time, such as: Income replacement, Financial security for dependents, Mortgage protection, College funding, Final/burial expenses

    Use a free online quote engine to compare term rates from hundreds of top-rated companies to see how affordable it is. (I’d recommend Quality Term Life because they don’t ask for you phone or email to get quotes.)

    QualityTermLife

    January 1, 2013

  10. Barb, while I can definitely agree with your thoughts on business attire, I have to chime in and agree with previous comments that highlight reasons why there is no one size fits all solution for life insurance. What causes people to write these “permanent insurance is a hoax” articles are the salespeople themselves, unfortunately. When designed correctly for the right client, permanent insurance products offer benefits that you can’t find in other financial products. Unfortunately (again), they are often sold to the wrong people (as in your example) and designed for the salesperson’s benefit over the client’s. Don’t throw the baby out with the bath water. We’re not all bad, nor are permanent insurance products when used appropriately.

    The Insurist

    January 21, 2013

  11. @The Insurist, As I mentioned in the article “some people may benefit from universal life insurance.” It would be cavalier to suggest that I know what type of insurance is best for all, and I understand it’s tough to speak in absolutes. But, more times than not, term insurance is preferable for the insured.

    Barb

    January 21, 2013

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