Hey Folks, I was listening to Dave Ramsey, my favorite contrarian, who speaks about all kinds of financial truths that are not true… he was on the radio last evening with a caller…. and he said once again…I don’t need term ins… I don’t need any life insurance… but I have it, BECAUSE
SHARON WANTS IT..
If that’s not the epitome of self-contradiction, I don’t know what is. What I believe Dave is really saying, is: There are some things that you absolutely need to cover, that you can’t itemize or analyze or spreadsheet or put down on paper. One of those things is The Unknown. Another is making sure that your spouse has that “safety net” that your spouse “feels” that he/she wants to have, and having life insurance right up until the day you expire and “graduate” is one of those things.
You need to understand why term insurance can become a trap. And when Dave or anyone tells you that you need to have term insurance for a specific period of time (that time being, while you “need” it) he is not following his own advice.
You cannot know today what those future unknowns will be, until you get there. And when you get there it will be too late to get back the life insurance that you have already cancelled because it became too expensive, or you allowed it to expire, or its guaranteed term ran out.
Or maybe you decided you wanted to convert it to some form of permanent insurance, but you waited too long, because the conversion period expired.
Or maybe your term insurance agent had no knowledge about how to convert your term because they don’t specialize in lifetime protection, they only sell term life insurance as a commodity based on cheapest price.
And maybe the options for conversion are not the ones that you would choose if you had all the information in advance. Because all so-called permanent policies are not created equal. (A discussion for another time.)
There are lots of things to consider that your low-cost, no-service term insurance specialist cannot help you with because they simply don’t know.
Did you know that virtually EVERY term policy ever issued (I’ve only read these contracts for 39 years so I admit I have not seen them all) contains a guaranteed conversion privilege that will allow you to convert to some form of permanent insurance?
If you have no intention of ever converting, why would you want to pay for that option?
And if every policy has that option, wouldn’t you want to know IN ADVANCE what those options might look like?
I have personally spoken and corresponded with Dave Ramseys’ term specialist ELP (endorsed local provider) and they seem to have no idea about the contractual term conversion privileges contained within these policies. That’s kind of scary. Their statement to me was that, since they don’t offer that service, we would have to wait until the time of conversion (perhaps 20 years from now) before we could learn about those options.
Here is an excerpt from an email I preserved from my 2010 correspondence with the client and the ELP representative:
These policies are convertible to whole life. If you were to convert it, it would go to the company that you have the policy with.
We wouldn’t know what the cost for that is, until you decided to convert, when we would have to request the quote from the company.
We don’t recommend that you convert a term life policy, but we have to let you know that it is an option. If you have any additional questions,
please contact the new business department at the phone number below to speak with the first available agent.
And so I ask you:
Wouldn’t you want to know TODAY what kind of term policy you were getting into?
Wouldn’t you want to know TODAY what kind of options you were paying for? I would.
A term life insurance policy is a legal contract, and you should read it and understand every word of it BEFORE not after you purchase it.
And I would go out on a limb here to say, so should your agent!
Apparently, not even Mrs. Ramsey, by Dave’s own testimony, agrees with Dave’s advice that you should cancel your term insurance when the “need” goes away.
Dave himself professes to have “no need” for life insurance, term or otherwise, and yet…Mrs. Ramsey apparently still thinks she should have the security offered by that term life insurance.
I am convinced that the idea of life-long life insurance is the best method to cover contingencies that we cannot possibly anticipate – – That’s why they’re called Unknown.
Watch this space to continue the discussion of all the issues that can and may and will come up after the so-called period of “need’ has long passed!
In other words… Life Insurance is for life. Life Insurance is indeed for the living. Your Life Insurance policy should last at least as long as you do!
– Joe Pantozzi