CNN has an article about life insurance salesmen on military posts. As someone who used to do financial planning for military, including selling life insurance, I thought I’d throw in some advice.
First, if you’re doing business on post, the salesman should have a piece of paper with permission to sell insurance and financial products on post. Ask for it. If you’re buying securities-based products, you can check the National Association of Securities Dealers website to see if there have been any complaints filed against your agent.
Secondly, insurance should be part of your portfolio even if you have SGLI which is a good deal while you’re on active duty, but the price of it increases every day you get closer to your inevitable demise and you’re not on active duty when it converts to VGLI. If I remember correctly, the premium at age 65 is like $450/month for $300,000 of insurance because they want you to drop the insurance so they can keep all of those premiums you paid over the years without paying out your death benefit.
So you need a permanent policy to replace SGLI when you get out of the service and it’s cheaper when you’re younger and in better shape – even if you’re not married or have kids, it’s a good idea to buy life insurance for a good low premium to last your lifetime.
I sold a lot of variable life insurance in the Clinton years – it had mutual fund like investments under the death benefit, but I doubt I’d sell any now because of the lessons of the stock market over the past decade. The expenses in the policy don’t make it a good investment. Universal Life which earns interest based on current interest rates are probably pretty ugly, too. I’d stick with the more expensive, but more reliable Whole Life. It has guarantees whereas Variable and Universal are impacted by their respective markets. Life insurance needs guarantees.
If you’re going invest in securities, do it in mutual funds, not in your insurance. I have a variable policy on my wife and it hasn’t been doing well since I bought it fourteen years ago, so I learned the hard way.
Financial planners make more money on insurance than in their mutual funds, so naturally, they’ll try to sell you variable insurance, but if you’re investing for a kid’s education, that’s not where you should be putting the money…mostly because the internal expenses will eat your money faster than you can earn it. If you need the money in ten years or less, mutual funds are where you should be investing, not insurance.
That’s just my view from my own experience. Buy insurance before you get out, because you don’t want VGLI and don’t let dealing with salesmen scare you away from an important financial planning aspect.
One other note regarding life insurance for active duty members, make sure it includes something called a War Clause. This is a clause that says the insurance will still pay even if your death is the result of engaging in actions in defense of the country. Not all policies will pay if you die in combat.
I always had additional life insurance while serving cause at the time SGLI was a joke.
As someone who has been in the Marines and has now transitioned into the financial services/insurance industry, I echo Jonn’s thoughts on this issue. As for the on base solicitation, it’s definitely unfortunate… my company actually has a strict policy of no business whatsoever on military bases. I wish other companies would follow suit.
There are many different types of permanent insurance, but as Jonn said, I would definitely stay away from any kind of “Universal or Variable” product. If you are young with no health problems, the insurance expense is minimal while the possibilities on both the protection end (the death benefit) and the cash value accumulation (savings vehicle you can access in life).
There are plenty of “experts” out there who will tell you to buy term/invest the difference and tell you whole life is a bad idea. Term is the way that insurance companies get rich, because only about 2% of term policies actually pay out. This means that people are paying thousands of dollars and then outlasting their policies. And of course, as you age and you wish to continue with term, it costs much, much more.
My response to anyone who tells you that term is the way to go is this – do you want your life insurance to be in force when you die?
(Sorry for the book- just really passionate on the subject.)
Just to clarify my previous.. I guess I deleted a very important part on accident….
I would stay away from Variable/Universal products, but other more conservative products such as Whole Life are very good for a guaranteed death benefit as well as long term growth in cash value.
Check your service-affiliated Mutual Aid insurance association (Navy Mutual Aid for the sea services and Army/Air Force Mutual Aid Association). I suspect they offer a pretty good product (primarily because I have one).
The current crediting rate on my Navy Mutual Aid policy is 7.5% and has been as high as 11.5%.
My father was a State Farm agent for 38 years and never saw a better crediting rate and he was pretty impressed with the products. Both orgs run pretty lean and don’t charge commissions and include a War Clause.
Check out their websites.