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More Insurance Myths Debunked….

ProtectionI recently read an excerpt from an article expounding the concerns associated with index annuities. Whoever had these concerns is unclear, so I had to smile to myself, but as a passionate believer in index annuities as part of a comprehensive and diversified portfolio, and out of the belief I hold that, like myself, many of my colleagues truly wish to help businesses and individuals understand the many retirement options open to them, I felt compelled to address some of these concerns:

 #1        “They are going to sell you!

As a nation built on competition, free enterprise and freedom of choice, I’m not quite sure why this should be a concern. Anyone offering a product or service is “selling” something, including anyone offering a 401(k) plan. Admittedly, there are bad – even awful – sales people, but the true value of a sales person is one that offers all the options, the pros and cons, educates and allows the consumer to choose what’s best for that consumer. To imply that anyone offering index annuities will force the consumer to make a choice that would ultimately not be in their best interests does little more than engender mistrust.

 #2        “Informative lunches that are really veiled sales pitches”

Who has ever accepted an invitation for a free “weekend for two” to some resort and not understood that part of the deal is a sales pitch for a timeshare? Potential attendees to these lunches are not fools. A great presentation is about informing, educating, and earning trust, and most individuals want to do business with people they know, like and trust.

 #3        “Surrender fees — as high as 20% — imposed on buyers who want to cash out before 10 or more years have passed.”

 Perhaps there is an insurance company out there that does indeed have such draconian surrender charges. However, the vast majority of customers who purchase index annuity products do so for the GUARANTEED INCOME they will derive – at which point surrender fees become a non-issue.  If the customer is looking to make a short term investment, then they should NOT be looking at index annuities as an option.  Surrender charges are meant to dissuade customers from using index annuities as short term investments and the right insurance consultant would advise their clients against doing so.

 #4        “Offers of “bonuses” that aren’t worth as much as they seem and that some people never actually collect.”

A company that offers an annuity buyer an 8% bonus gives that buyer an 8% bump not only on their deposit but also on any riders that may have been included. When income is requested, the principal amount plus the 8% bonus is calculated. Why would this not be attractive to a potential client?

 #5        “Products so complex that buyers — retirees who are at their most financially vulnerable — can’t tell whether they’re getting a good deal or are just getting taken. “

 A recent survey of 401(k) participants showed that 71% were unaware that fees were charged by their plan providers to maintain their account.  When told of these fees, 63% could not determine the amount of these fees.  This is a clear indicator that the financial industry as a whole needs to do a better job educating the public on the complexities of all finance related products.


To have people entrust to you the safety of their hard-earned income is a privilege, so on a final note, I’d like to quote Albert Einstein:

“Whoever is careless with the truth in small matters cannot be trusted with important matters”


The New Look of Insurance – 4 Insurance Myths Debunked

Myth #1: Insurance is a BAD Investment

It's a Myth

It’s a Myth

This one is so obvious I don’t even have to to say it. It’s almost like the words to Sweet Caroline. After one verse, Mr. Diamond just waves his hands and the song sings itself because everyone knows the words!  Insurance is a BAD investment.

But what if you set up your life insurance so that it actually ACCUMULATES money?  Today’s insurance options have cash values that, given time to mature, can accumulate significant amounts of money with internal rates of return.  These options can be set up like mutual funds (Variable Life Insurance), tied to an index (Indexed Universal Life) or tied to bonds and cash instruments (Whole Life)….

Insurance goes from being a bad investment to a long term, cash accumulating

portfolio asset. Yes, really!

Myth #2: I have to die to receive any benefits

It's a Myth

It’s a Myth

True – this used to be the case when your grandfather bought life insurance back when insurance used to be a death benefit only product. But today, most cash value life insurance is being purchased for its living benefits, tax free growth and tax preferred withdrawal income.


Myth #3: Only Insurance Companies Make Money On Insurance

It's a Myth

It’s a Myth

Once upon a time insurance was nothing more than a safeguard against death or disaster.  The new look insurance has grown beyond this and can form a valid component of a mainstream portfolio. Today, you can effectively integrate insurance into a mainstream portfolio asset position.

Myth #4: Insurance is Complicated and Expensive

It's a Myth

It’s a Myth

A recent survey found that over 70% of participants in 401(k) plans are unaware of the fees associated with their plans and what they cover.  Given the state of today’s economy, many people are even unsure if their 401(k) plans will meet their income needs when they retire. The complication and expense myth are the same. When people sit with qualified professionals who can speak simply, clearly and can educate appropriately, complicated things become less complicated.  Today’s insurance strategies can offer lower-risk long term alternatives to 401(k) plans – you just need to know who to talk to.