Why Is Life Insurance With Cash Value A "Ripoff" For Most Customers?
Written by Steven Lo   
Tuesday, 15 June 2010 07:29
A lot of people get confused by millions of types of insurance plans out there. The truth is, it's very simple to choose: Refuse all kinds of life insurance with the cash value feature, and simply choose the basic, no non-sense term life insurance.
by StevenLo


A lot of people get confused by millions of types of insurance plans out there. The truth is, it's very simple to choose: Refuse all kinds of life insurance with the cash value feature, and simply choose the basic, no non-sense term life insurance.

The reasons? As a former life insurance agent who has seen a lot of cases where customers really got burned, I can say that it is really a bad deal for customers to buy life insurance for their entire life. Insurance isn't designed to insure the inevitable, but the unpredictable. If an insurance policy isn't built upon this principle, the customers will pay more than they should. Let me explain.

Life insurance isn't a gamble. The insurance companies do all the math and stats to make sure the number of people who die during their coverage will not cost them more than the premium they have collected. Those who live long will share the cost with those who die early. Therefore, the overall cost for a policy plan depends on the group of people it insures. For example, if the group consists of smokers, it will be much more expensive than for the group that doesn't smoke.

This is why whole life insurance is more expensive. The company expects to pay you at some point, so they contribute this factor to the price formula. This one fact alone increases the price by at least 4 to 10 times! For term life insurance, the products usually insure the customers from 10 to 30 years, when they are still young and healthy, so the companies charge much less as they expect them to live beyond the coverage.

Now here is the single most problematic issue that tricks a lot of people;, the cash value feature. Many people get confused by this term and think this is a benefit, but it is not.

I have written another article that explains all the cliches that insurance agents use to sell cash value life insurance. The jargon might sound different and the name for the policy might sounds fancy, but it's all the same underneath. Unlike term insurance, which only gives the agent a meager commission fee, all the varieties of cash value life insurance are lucrative for them, but a rip-off for the customers. If they don't get you at the front door, they will get you at the back door. See the link to that article I mentioned in the below.

Information:

Looking to find the best deal on life insurance? then learn about how to insure yourself by learning how to buy term and invest the difference.