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Last week I got a gem in the mail. I sell life insurance as well as help people with investments in my day job which supports my ability to bring local news to you via the Express. In the mail was a “Guaranteed Acceptance Whole Life Insurance” with a Mutual of Omaha return address and a Companion Life Insurance application.
I scrutinized it. It is yet another chapter in a book I know well. Such mass-marketed life insurance policies are to insurance as McDonald’s is to nutrition – rough and expensive. AFLAC, Combined and Companion all fit under the same umbrella, selling overpriced product to people who think they are making a smart choice because they don’t understand the alternative.
Here’s what the mailer told me: $10,000 of whole life coverage for a male, age 62 is just $61.90 monthly. That is 742.80 per year. Give it 13 years and you are behind. If you think you are going to be done by age 75? Forget it. It is a bad deal
Here’s a better idea: Invest $62 monthly in American Funds Growth Fund of America. 10 years from now, the most likely outcome is you will have $14,192 (given about 50 years of rolling 10-year period rates of return). And if the life insurance sales guy tells you “but the death benefit is tax free,” understand that by naming a beneficiary, there is a step-up in basis on date of death meaning it is tax free. If you want to talk about investing, or life insurance, give me a shout.
