Legal Insurance Scams?

this past saturday i was reminded of a hidden tragedy. the majority of individuals with life insurance have either a universal or whole life policy. if they only new how it worked they wouldn't have ever signed on the dotted line.

universal and whole life policies are very similar, and i will keep my explanation simple. they both include an insurance policy that is good through the age of 95 or 100, depending on the state of issuance. also they have a sub account that part of your premium goes into for your retirement.

so lets say that you buy a 500,000 policy and you start paying X dollars per month for it. part of the money going towards your insurance, part of it going towards administrative fees, and part of it going into your retirement account. does this sound okay so far? it does doesn't it. what if i told you that if you cancel the policy within the first 5 years you will not get any of the money that has gone into the retirement account? that's right the insurance company gets your insurance premiums and your retirement premiums. they do not tell you this lovely factoid when they sell you the policy.

well my friends. it gets worse. lets say that you've had your policy for 15 years and you've put 200,000 into your retirement account, and one day while going to work you get killed in a car wreck. the insurance company will pay your family the 500,000 from the life policy, but they keep the 200,000 you've put into the retirement account. this is called option "A" or "1". they normally select this option for you without telling you about option "B" or "2". this option allows your family to get both the insurance and the retirement, or at least that's what they want you to think. what really happens is they charge you a higher premium for selecting option "B" or "2" and use the extra money to purchase a second policy for you for the exact amount that is in your retirement account. so really your family still isn't getting the retirement money. is that not just wrong?

as a financial advisor i deal with the full spectrum of finance. this includes life insurance. i'm proud to say that my company is the only one in the united states that doesn't sell these life insurance policies. we sell what is called term life insurance, and teach families to invest their money in mutual funds. this method allows your family to get both the life insurance and the retirement upon your death. as well as this type of strategy has historically had a much higher rate of return for your retirement account.