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The Pitch - A Tale of Insurance

A Tale of Insurance

"The Pitch"

Sometime before the age of 25, or you will become even sitting across from a friend or friend of a friend who try to sell you life insurance. The pitch is sound and convincing, if you are married sure it will be a love component to the sales presentation. See hear the classic, "Carlos, if something would happen to you one does not want Stephanie financially secure? "When I and everyone who has ever heard this line head bobs up and down in agreement, the next line, like a boxer's Knock Out Punch follows the seller says: "Not only will you be taking care of Stephanie, in the event that something happens, it's a pretty good Investment. "They are knocked out. You look lovely in your wife's or husband's eyes and say to yourself, as I go so long without this product? I need life insurance.

The rest of the sales presentation is fast because very few people understand the mathematics. They are shows with a featured figure that more money invest, as each month than you can afford, and it shows, it grows an astronomical amount that you own several villas of the time you are charged 65 is. After a few civilized discussion back and forth between you and your spouse and the obligatory much so we can afford each month countered by the seller, "How you can not afford me "sign on the dotted line and lets the seller. You are now the proud owner of a permanent life insurance and Seller is counting their commission

As is the seller, you are leaving the door with mixed feelings. On one hand you have your spouse protected. You love your spouse. On the other hand it is a totally unsatisfactory experience, because a few minutes before you had this extra money every month, as you like and now it's gone to do. You are left to think what you can not do with the money. Not only is it gone, and not only your future holidays, new Car or whatever you look like less, you look cheap. You look cheap because the seller showed up and camped or inappropriate presented monthly Payment. Your job is to sell you the highest possible monthly payment. This means the insurance strategy is to go up with the presentation and then work up to a level you can afford. It works. Of course, within a few years you will cancel the policy and all your money will be gone. avoid purchase if you can.

The scenario that I played in the living room above described have rooms all over America and most of the developed world every day. It is effective. It is to be better informed in your responsibility. The product that this couple have just purchased is terrible. It is expensive, there are better cheaper alternative is unlikely that they deliver what it promises and it is not an investment worth considering. This story is in the section marked Young Tales, because if you're unlucky and have not heard, it is close to playing in a theater in the not too distant future.

Before I give you my recommendations Insurance, we must understand, it's a bit better. There are two types of life insurance. The first is called the second term and will be lasting. Term insurance is not as an investment because it has no value at maturity. It is pure insurance because if you have still living at the end of the term of the policy no cash value. Term insurance is cheap. It is easily accessible and if you have a life so many people like is the preferred route to take when buying life insurance. Permanent insurance is considered an investment, because since the policy is permanent, it has no name. Thus conceived does insurance for a while and permanent insurance means you will up to the day you die. Term insurance is never a cash value while continuing to make promises to you rich, but the reality is that only very few and I mean really, very few permanent measures to actually deliver.

In the last sentence mean that I could permanently insurance if all the stars align, have a Present value. Let me explain. In most cases, if you cancel your permanent policy within a few years after purchase it will have no cash value. You have bought with the reflection a very expensive term policy. How can that be you might ask? How can I pay the insurance company a monthly fee, often more I for an equivalent term policy and when would pay, I quit is I have no money in my investment account? The answer is the permanent life insurance salesman. He or she has most of the difference between what you think you should have and what you actually have. The Commission states that the seller receives for the sale of a permanent life insurance is approximately equal to the total amount you pay in the first years. It is an outrageous amount to someone pay for it is still the traditional business model of most insurance companies. Is there a solution? The answer is yes. They are called permanent insurance no load and many well-known companies that sell it. However, I can say without equivocation that for those who only need a term life policy is the preferred way.

Many permanent insurance, as the fund industry have moved almost two decades, the distribution constant no load insurance. This means that if you change your mind after a couple of years that you are not fixed to the enormous cost in advance. This effectively means that the permanent insurance industry is now distributed in the load and no load permanent insurance. The difference in cost between the two significantly in the early years. I have no lasting impact policy, after three years of payments or payment of premiums, to see if you change your mind, the policyholder gets back almost all their money. I have then compare, what would they get with the loaded version and they would get nothing back. This is because despite the constant phrase in the lexicon of selling insurance significant, the reality is that people do change their mind. When you buy a permanent policy will allow for the possibility of changing your mind should.

So, if you buy insurance, and what form it should? My philosophy is that life insurance be purchased to avoid disasters. Are you single and die, chances are that no one suffer from economic hardship your death. The same is probably true if you are married without children. If you fall into one of these two categories, You do not need life insurance, but if you feel compelled to check it anyway to purchase it is a long term policy. If you have children and you are still wealth in the construction phase of your life, then you should certainly purchase term insurance. Get enough to replace your income, at least 10 years. With these three categories, I probably more than 95% of Americans are included. This means that most people either do not have or need life insurance risk insurance. What about the other 5%?

The remaining 5% fall in various small subgroups. The difference here is not one of marital status or children. The 5% group is unique, since it is not building wealth, they are rich already. So the question is do many people need life insurance? Let's take a look at my philosophy. It means that life insurance acquired in order to avoid disasters. So you might ask, are not rich people insured in essence itself? If something happens to them not, they have enough Money to their survivors is to prevent a disaster? The answer in most cases is again yes. Most rich people are self-insured, except for those tied their wealth in illiquid investments have no need for life insurance. So, why so many rich people buy life insurance? The answer is simple. You do not need it, but they want it. You want to make sure that when they die, they give so much wealth after tax as possible to their heirs. It is in these Cases, and only these cases I recommend that permanent life insurance. If I do, however, I recommend the purchase of permanent life insurance no load. The no-load version is such a superior product to the high costs, commissions, generating version that I can not see why anyone would pay more for less.

In summary, if you need building wealth and not buy any life insurance. If it is then a term policy is the best solution. If you are wealthy you do not need life insurance unless your wealth is illiquid because you have insured themselves. If you are wealthy and decide to buy it anyway maximize what you leave to your heirs, do Yourself and your heirs a favor and buy the variety not a burden, if you change your mind. If you have a permanent policy, I suggest you look for a change to a term policy.

About the Author

Great story tellers know that people learn and understand life lessons when they are told in the form of a story, a tale or a fable. A few years ago I embarked on a project to teach my children, all 4 of them, the things that I had learned about managing money.

As a first generation Cuban-American most of what I learned as a child, and most of what I still know today, was told to me in the form of a tale. The Cuban tradition, like so many others, has been passed down around the kitchen table, over good food, a strong family, true friends and the optimism that our children would contribute to a better world long after we are gone. Because to so many the written word is beyond their reach, the spoken word has been the way to communicate through the generations.

My intent is to convey what I have learned about money, finance and investments in the same tradition. My lessons are all told in the form of a tale and since I have been advising individual investors for more than 25 years, I have lots of tales that may hit close to home. I hope that you enjoy them and let me know what you think.

• Co-Founder of Chicago Wealth Management, Inc.
• Nationally Recognized Expert on Sustainable Distributions
• Registered Investment Advisor
• Speaker on financial/investment planning
• Fluent in Spanish - First Generation Cuban/American

Education:

University of Rochester - MBA - Finance and Applied Economics - Honors - 1982

Johns Hopkins University - BA - Natural Science - 1980

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