I read a lot.
I much prefer non-fiction over fiction though the other day, the (very) fictitious article entitled, “Whole Life Insurance vs. 529 College Savings Plans…Who Wins?”, got my interest as no other piece of fiction that I can recall. The author’s position (which I deduced from the title alone), is that whole life is the superior option for funding higher education costs. I immediately experienced disbelief followed by laughter and then laughter followed by disbelief.
This article can’t be real. This author can’t be serious. Why is this question even being proposed? Will there ever come a day when life insurance agents stop believing that a single product can solve every financial problem? Hint, not likely.
Many of you know that I review existing life insurance policies to find the “Gotcha’s and Trap Doors” that policies often present. In the 26 years that I have been in this business and having reviewed every policy type and every funding purpose imaginable, I have found that those most disappointed in their policy, are those who bought it for college funding purposes.
Yes, I know all the arguments that agents propose in order to place the policy and make the sale. “Cash values aren’t reported to FAFSA.” In most cases, if you have enough free cash flow to fund a policy that creates significant cash value, your profile is unlikely to qualify for FAFSA. Another position taken by whole life enthusiasts, “A whole life policy will self-complete in the event of death.” And term insurance won’t? This is exactly why term insurance exists. Why not a put in place a tandem plan of a 529 and term coverage? This option will produce the desired college funding benefit, while not disrupting the budget.
I will be direct. I believe deeply in permanent life insurance under the appropriate circumstances and for those whose circumstances call for it, no other product, financial or otherwise, can do what it can do. Therefore, if appropriate, I will unapologetically recommend permanent life insurance. It’s time however, for consumers to stop getting sucked in. It’s time to discard fiction in favor of non-fiction that recognizes and promotes all of the financial tools available to best solve a specific financial problem/need. There are far too many available solutions, to get locked into only one.
Agents, are you listening? Hint, not likely.
Originally published in June 2018 through Tamar Fink Wealth Impact. Used with permission.