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.
