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Dear Everyone!
After the events of the past few weeks, my faith has been shaken.
I've always been a fan of small, local community banks. That's why I bank at Sierra Vista in Folsom, at American River in Fair Oaks, and why I like Folsom Lake Bank in Folsom.
While there is nothing wrong with the large (huge) insurance carriers, with size comes exposure. Who know what is in their portfolios? No one. I read this week that AIG was brought to its knees by a rouge division that had no oversight.
When you deal with small organizations, businesses, and banks everyone knows what everyone else is doing!
It is the same for insurance companies. When the products are right I'm going to recommend carriers like Ohio National and Mutual Trust Life for universal and whole life, as well as West Coast for term.
You never heard of them? Well, there are many hundreds of smaller old-line, conservative life companies that have never failed to meet their obligations... but they don't spend hundreds of millions on advertising like a Met ("Get Met It Pays") or a New York Life ("The Company You Keep") does.
True, while large mega-companies might have the deep-pockets to weather unstable conditions, I find that smaller companies with conservative, risk-adverse management, don't get themselves into unstable situations in the first place.
Small is good. Small is better. Small can be a lot safer.
-Al
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WL vs. BTITD
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The debate continues to rage... even more so as the equity markets tank. Should you buy whole life (WL) or should you buy term and invest the difference (BTITD) in the market?
Have you heard of a company called Primerica? Their mantra is BTITD. They claim that when you buy whole life that all you ever get is the death benefit. That could be true, but most often it isn't.
Let me give you a couple of numbers for everyone else out there in the real world (as opposed to Planet Primerica.) Take a 43 year old. She gets a policy that provides $261,971 in life insurance. At age 80 she has guaranteed cash value of $176,747 BUT her projected (possible) death benefit is GET THIS.... $709,596.00
If the insurance companies are going to only pay the death benefit of $261,971 how does Primerica explain how the woman will get $709,596? Where does the money come from?
The answer (they don't tell you): cash value and dividends that can buy additional insurance. They both add up... making the difference.
BTITD has many holes. Lets look at it...
At age 28 I buy $1,000,000 of 20 year term. Cost $40 a month and let's say that I am saving up a storm... until I am layed off for eight months... or maybe get sick for a year.
Mortgage, car payments, food, gas, insurance (property, auto, term, health, etc..) all need to be paid.
Ok, so I continued to pay all of my bills but drain my savings... but I did a super job of keeping everything current. So what was I able to invest? Nada!
Skip forward. Now I am 48 years old, and I have had four kids ages 20, 18, 16, 13. I am in a bigger house and still have a need for that million dollars of coverage. There is one problem. I'm diabetic now. So I go to my agent and I say "Hey I want to renew my insurance."
He says "Well lets look at your policy. It says here that if you want to renew your policy (no medical exam) it will cost $480 a month."
"Well that is crazy. I am not going to pay that much," I say.
He says, "OK but if you don't and you go back on the open market where you have to take an exam, that same policy is going to cost you $625 a month, or maybe more... if you can even get it with your medical problem."
If I had taken a whole life policy I am still paying the same price at age 48 as at age 28 and at this point my dividends (paid by mutual companies like MassMutual or Ohio National) could be enough that the policy can pay for itself.
The numbers don't lie. People, if you knew what a cash-cow term insurance was for the insurance companies you would never buy it. Out of 100 term policies sold the insurance companies know that only 2 (ONLY 2) are going to have to be paid. The reason term insurance is so cheap is that the company almost never has to pay a claim.
Why is WL more expensive? It's because someone collects a check.
Let's talk about cost. Things happen in the future, circumstances change, health changes. Would I recommend to a 28 year old who only has $200/mo. to use it all to buy permanent cash value insurance? No. It would not give him enough coverage.
I would say that he should spend $175 on cash value insurance (giving a death benefit of about $350,000) and $25 amonth on $500K of 20 year term. See, I protected his long term future with something that will always be there and something to cover his higher short-term needs if something happens while still young.
If nothing happens he gets cash value on the whole life plan... he owns it and it is his. His term policy will most likely be a donation to the insurance company.. but will cover his family for twenty years in case the worst happens.
My advice to everyone who has a 20 year term policy is to take it out and read it and see what the scheduled premiums will be at year 21. You will be shocked. If you pull out your whole life policy you will see that the premium never changes. It never goes up. No health issues will change it.
Term only works when you are in perfect health. But once you have any... and I mean ANY... health issues you are like lambs being lead to the slaugher. So go read your term policies and if you are not healthy just double what you see there for the renewal price!
Now let's look at the "invest the difference side."
How about "lose the difference?" How about "spend the difference?"
In a perfect world where stocks always go up no one ever loses. But a lot of people did lose in their investment accounts... and to make matters worse they may be stuck with a policy they can't (afford to) renew. If they would have bought whole life there would be no issue... and no loss.
When you "buy term and invest the rest" it comes with risk.
So when the policy holder comes back to the agent and asks where IS his money, the agent has to say "Hey you made bad choices. It's not my fault you picked bad stocks." (Note the "you" and not "we!")
The policy holder says "But my wife is going to be penniless if I die."
The agent says, "Hey, it's not my fault you made bad choices in your stocks. Sorry pal."
And if the agent is also the broker, he wins twice. He made money on the insurance AND on the fees for whatever stocks you and he picked.
So guess what is going to happen to all the people who bought term and invested the rest on the advice of their agent? When they look at their statements and realize their equities are gone and they have a wasting asset in a term policy the you-know-what is going to hit the fan.
Financial planners are going to have to say "Not our fault because the theory is great. So what that you lost money. The stocks will come back."
Yeah... long after you are dead!
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Universal Health Care? How Are We Going To Do That?
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Note: Everyone and their dog knows that I'm in favor of junking the current health financing system and replacing it with something else. That said, I like to present opposing viewpoints to this, and I do so now. This was written by Bob Vineyard an agent in Georgia whom I highly respect... but still disagree with!
Having been in this industry for a long time, and witnessed many changes (as well as political promises that did not pan out) I don't see the landscape changing drastically for a long time, if ever.
If you look at nations where health care is provided via taxes you see the same underlying issues we have here. There are no mechanisms to control health care costs and the access to health care is rationed.
Until a way is discovered to control the cost of care, any delivery system is destined to spring leaks.
The USA system is a mirror image of other countries in the way we address health care. We require patients to pay for basic care, but catastrophic care is covered either through private payments or laws such as the Emergency Medical Treatment and Active Labor Act. Other countries cover basic care but ration catastrophic care.
So the question is, which would you rather have?
In Canada, Great Brittain, France, etc. rationing exists but you would never know it from those who favor these plans. Just as there are stories here about someone left out in the cold in the USA, the same occurs in countries where taxpayer funded plans are the norm.
The cost of providing "universal care" is astronomical. There are simply not enough dollars in any economy (except perhaps the oil rich nations) to provide unfettered access to unlimited care. Our own economy is a train-wreck and it will get worse before it gets better. The banking system is on the verge of collapse thanks in part to congressional meddling in the mortgage market.
Indeed, the mortgage meltdown was instigated by Congress attempting to force lenders to provide access to "universal mortgages." Lenders who failed to extend credit to those who were not credit worthy were fined for red-lining.
Now politicians want to pass this mess on to the health insurance industry by chastising those who are currently red-lining high-risk clients.
You don't have to look too far to see how badly legislated "universal coverage" has failed. Just look at the handful of states with guaranteed issue. And how about those risk pools? The Florida risk pool has been closed for years, CA has a queue and other states have issues as well.
The new models for health care, such as in Taxachussetts, are already bleeding profusely.
And speaking of bleeding, the federal government is on life support but no one wants to talk about it. For each of the last 5 years the feds have spent $500 BILLION MORE than they took in and the total debt exceeds $9.3 TRILLION. The unfunded liability for the federal deficit exceeds $500k per household.
So there are two questions that hinder universal care. How will you control costs (other than rationing) and how will you pay for it?
Of course this is a logical response to an illogical proposal which results in a conundrum.
So how do we find a way to reduce health care costs?
Technology drives a good bit of health care costs. Newer imaging devices, pharamceuticals, even micro-surgery techniques all come with a price.
So does litigation and medical malpractice plus the defense of frivolous suits.
Throw in untempered demand, particularly from those with rich benefit plans and you have over-utilization without sufficient resources to pay for it for everyone.
Demand can be offset by better living. We are rapidly becoming a nation of not only obese adults but children as well. Physicians are seeing cardiological phenomena in teens that normally do not start until middle age. The increase in type II diabetes in children and teens is something we have never seen before. Our high fat, high calorie diets combined with an almost complete abandonment of regular exercise has led to a nation that is slowly dying of almost completely preventable diseases.
We want the latest and greatest techniques, and fast cures that come in a pill. Docs give meds; they don't suggest lifestyle changes. Demand for medical services is out of control.
This is not just a US phenomena but is worldwide.
Taxpayer supported plans such as Medicare artificially control costs by shifting them to the participants in the form of higher premiums, co-pays and deductibles. They also limit, and in some cases reduce, reimbursement to providers... which has the effect of limiting the number of providers willing to accept Medicare patients.
In other words, rationed health care.
Every dollar lost by treating Medicare patients is shifted to those with the ability to pay... which means those with insurance.
Rationing of medical care is the only truly effective method of controlling costs but it comes with serious repurcussions.
So how are we going to do that?
Bob Vineyard, CLU
6595-G Roswell Rd, #294
Sandy Springs, GA 30328
(404) 252-5859; (815) 301-6615 fax
http://bareboneshealthinsurance.com
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Well, that's a wrap for this issue. I hope you've found some of the info above useful and interesting. If you have questions about life or health coverage, safe-money annuities, or employer group benefits just give me a call or send email.
Sincerely,
Alan N Canton
InsuranceSolutions123 Agency
InsuranceSolutions123.com
916-962-9296
CA License # 0F31110
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Al Canton, Owner
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I'm Al Canton, owner of the Insurance Solutions Agency.
Everyone promises the best service, etc. So I won't bore you with that message.
Bottom line, I know health insurance, work-supplements, medicare, life, and annuities.
Most importantly, I'm honest. I will not put you in a product just for the money. I've been here 25 years and I've built my business reputation on integrity and honor.
It's that simple.
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