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Jul 12, 2016 by |

Contra Costa Life Insurance Attorney: Whole Life Insurance

The Waiting Game: Why Insurance Salespeople Push Whole Life Insurance

There are innumerable options available to a person looking at purchasing a life insurance policy. Universal, indexed, term, etc. While there are issues with many of these types, one in particular has drawn the ire of financial advisors and life insurance attorneys: Whole Life insurance. The basic element that separates whole life from the other varieties is that it is meant to continue indefinitely from the moment of purchase to the end of life. However, in order to make a profit on such policies, insurance companies have to get the policyholder to pay in other ways. It is these mechanisms that make whole life policies a very risky buy for seniors and retirees.

Whole life insurance is the most popular variety sold in the United States, and not necessarily because it offers the best value to the client. Whole life insurance sales earn a higher return for the insurance company, and consequently a higher commission for the insurance broker. Because of this incentive, marketers and salespeople have been working hard to extoll the virtues of the product, even though the hard math shows that it’s not the best investment for many consumers.

One signature feature of whole life insurance is the high cost. The policies are much more expensive than term life insurance policies with equivalent coverage (as much as 10 times the cost), something that is not fully explained to many clients by their insurance salesperson. Instead advising their clients to move between term life policies, some insurance salespeople try to convince them to but a whole life policy, for which they earn a much higher commission.

Secondly, Whole Life policies accumulate a cash value, essentially making them both investments and insurance. The company that sold you the policy gets to invest your money (typically offering lower returns than other investment firms), and you theoretically get tax benefits on your premiums. However, this is rarely how it plays out in real life. Instead, your cash value accumulates extremely slowly, initially returning less that you pay to maintain the policy. Secondly, your money can be tied up for years at a time, and surrender penalties can make it an expensive proposition to access your funds no matter how desperately you need them. Our Contra Costa life insurance attorneys have seen many cases where high surrender penalties resulted in a senior on a fixed income being unable to access their funds.

Based on the actual details of the policies, they might benefit a person with no shortage of money to pay for the steep premiums, and who has absolutely no chance of needing to access the money for decades. If that doesn’t describe you, a whole life policy might be a greater risk than a boon, and may have a severe impact on your ability to plan for retirement.

Some of the major annuity and life insurance providers are:

If you or a loved one feel that you may be the victim of an improperly sold or administered whole life insurance policy, contact the Evans Law Firm at (415) 441-8669, or by email at Our Contra Costa Life insurance attorneys have experience both with handling cases against with large insurance companies and negotiating an equitable settlement for our clients. Our firm deals with life insurance, annuities, and banking fraud, as well ad financial elder abuse and whistleblower and qui tam claims.

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