Picking The Best Life Policy For The Client: It Depends On The Need

For individuals who recognize a need for long-term insurance coverage, many financial publications and investment advisors advocate that the best way to buy insurance is to "buy term and invest the difference." However, no matter how good people may believe that argument is theoretically, in practice, a lot of consumers dont invest the difference. As for their term insurance purchase, once the premium becomes too cost prohibitiveand it willlots of owners will drop their coverage.

After all, why is it that only about 1% of all term insurance contracts actually pays out a death benefit? Because very few individuals hold a term contract until death.

Term insurance has its usefulness, of course. It satisfies shorter-term needs for death benefit protection. But for the long term, consumers need some form of permanent insurance.

This raises the question: How can the industry succinctly describe the various permanent insurance product chassis to consumers?

Its important to stress the pros and cons of each type of product. Doing so will make it clear to customers that, as the adage says, they will "get what they pay for."

The table provides some suggestions. These are offered with the understanding that many variations of the 4 major product types shown do exist. The points raised here should provide the practitioner with a good start in assessment.

Michael S. Pinkans, CFA, CFP, CLU, ChFC, is a registered representative and investment advisor with Equity Services Inc. and vice president of sales and promotion at National Life Insurance Company, Montpelier, Vt. His e-mail address is [email protected].

Reproduced from National Underwriter Edition, July 1, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.