Attached you will find a video from Dave Ramsey of Fox news responding to a question about his advice that term life insurance is all that is necessary. I just finished writing an article about similar advice from Suze Orman of MSNBC for TIB Bits.
BEWARE TV ADVISERS
First off, regardless of political affiliation, I do not appreciate the smugness from either Ramsey or Orman on this topic. They both appear to have the idea that life insurance agents are just sales people. Like politicians, they give blanket advice without taking the time to learn the details of each situation. They forget that every argument has two sides and the correct answer often requires the arbiter to know all the details.
BEWARE POORLY TRAINED AGENTS
Many insurance agents are only mercenary hacks. However, more times than not the public will recognize them for what they are. They will be forced to “find happiness in another career” within a few years. Typically, that happens in the first 4 years. The problem is that during their rookie years, agents can create a huge mess. If an individual continues representing life insurance longer than 4 years, they have probably figured out that there is more to being a life insurance agent than just peddling policies.
Unfortunately, the training system for life insurance agents is out of date. Rookie agents are at the mercy of commission driven sales managers and suffer from lack of training. Those that survive longer than 4 years have taken it upon themselves to seek out further training.
Any idiot can be trained to fill out an application. An insurance professional will not only be able to help with the application but know how and when to use the different types of life insurance available.
BEWARE OF ASSUMPTIONS
Mr. Ramsey and Ms. Orman assume that everything is perfect. In this video, Mr. Ramsey smugly assumes that every person has followed his financial advice and things have worked out for everyone to his ideal.
If you are the ideal person, the advice provided by Mr. Ramsey and Ms. Orman is sound. Unfortunately, there is a sizable population who are not ideal. Many of us were not able to contribute to a 401 k during our working years or were prevented from making investments while the kids were home. We were busy with fund raisers for our kid’s sports or scouts.
I recently read an article saying that the average person enters retirement with less than $ 69,000 of savings. If you beat the averages and have $ 750,000 in liquid assets, congratulations! You probably do not need life insurance.
If, however, you only have $ 25,000 in savings and otherwise life on a fixed income from Social Security, you may have a need for life insurance when you are 70.
BEWARE OF YOUR NEEDS
When it comes to life insurance, the type of policy is only one thing to consider. The first thing to determine is what you need it for. After that you will have to determine how long you need it. Only after you have determined what the purpose of the insurance is and how long that purpose will last will you be able to determine what mix of term and whole life you need.
Although I am not a self important blow hard on TV, I am a licensed Life Insurance Counselor in the State of Texas. That means that I am supposed to know what I am talking about regarding life insurance.
My philosophy is, “fill permanent needs with permanent insurance and temporary needs with temporary insurance.
In other words, use whole life for final expenses, such as funerals, since very few people know the exact time they will die. All other regular uses of life insurance should be met with term insurance since there will be an eventual end date to the need.
Life insurance can be used for reasons other than just the basic personal reasons. There are business uses, charitable bequests and estate planning needs that can call for Life Insurance policies as funding vehicles. Some of those needs can be met with term insurance but some of them require a whole life policy.
If you need one of them, listen to your attorney and life insurance agent. If you have retained competent professionals and they are working together rather than against each other, they will be better able to advise you than some celebrity on TV who knows how to use a calculator.