Life insurance Rule

[AndrewRoche]

Is there a rule/regulation (NAIC?) stating that agents should not sell life insurance as an investment and/or a savings account?
or is it that consumers should not buy life insurance as an investment and or/a savings account?
Anybody know?

 

[AboutThatLife]

It goes without saying that life insurance cannot be sold as a savings account or an investment.

One is insured by the FDIC and has certain rules about how many transfers you can make from it in a month.

The other is regulated by the SEC which life insurance is NOT.

So...representing life insurance as an investment or savings account is fraudulent because those are both legally defined and regulated differently than life insurance.

 

[Allen Trent]

It goes without saying that life insurance cannot be sold as a savings account or an investment.

One is insured by the FDIC and has certain rules about how many transfers you can make from it in a month.

The other is regulated by the SEC which life insurance is NOT.

So...representing life insurance as an investment or savings account is fraudulent because those are both legally defined and regulated differently than life insurance.

The SEC does not regulate all investments, they regulate all securities.

Other investments the SEC doesnt regulate: a business you own, art collection, antiques, cars, time, CDs.

I think you are confusing the word investment (which can be many things), with Securities/Echanges

 

[DHK]

You can compare it to anything you want... just don't rename it.

Okay, *I* call it "investment-grade" life insurance - only to help people think of it differently than how they would otherwise perceive it, but it's still life insurance.

 

[DHK]

I have a 24-point checklist where I compare permanent life insurance to 401(k)/IRA, Roth IRA, 529 plans, and after-tax brokerage accounts. (I have a similar one comparing permanent life insurance to owning a home as well.) I'm comparing the tax situation, liquidity, and overall risk/returns of the overall market... but I'm not talking about or comparing to any specific individual securities.

 

[AboutThatLife]

The SEC does not regulate all investments, they regulate all securities.

Other investments the SEC doesnt regulate: a business you own, art collection, antiques, cars, time, CDs.

I think you are confusing the word investment (which can be many things), with Securities/Echanges

Let's be serious. When an agent calls it an investment what are they normally comparing it to?

 

[DHK]

Let's be serious. When a consumer thinks about permanent life insurance what are they normally comparing it to?

 

[DHK]

Maybe we should all be comparing life insurance to social security instead.

Pay 6.5% of your employee salary into the plan. If you need cash for whatever reason, life insurance has increasing cash liquidity provisions over time. Social security: none. No access until they say you can access it. Get ZERO benefits until a minimum age of 62, but "full retirement benefits" at age 66 (or whatever it is based on birth year or whatever Congress decides to change it).

If you die too soon, life insurance pays out a significant benefit to named beneficiaries. Social security: $255 and surviving spouse income benefits and surviving children benefits until age 18/19 (if qualified).

If you become disabled, life insurance can continue to be funded the full premium - including cash contributions - if you have and qualify for the disability waiver of premium after 6 months. Social security: You might qualify for SSI disability benefits, if your disability is severe enough.


Anything can be compared to anything... if you're doing a full and accurate comparison. (The above is just off the top of my head and may not be comprehensive, but decent enough.)

What you cannot do is MISREPRESENT life insurance (or anything else). If you call it "the new FDIC-insured indexed investment retirement plan"... I think you'd have many problems with that, especially if you put that in writing and advertising.

 

[Allen Trent]

Let's be serious. When an agent calls it an investment what are they normally comparing it to?

Depends on where they live & their target market. I am assuming a rural agent might compare it to a farmer investing in Dairy Cows. An agent working with seniors might compare it to bank CD rates. An agent with clients with a stock broker that has a lot in cash/money markets/ bonds might compare it to those.

Again, I don't call Life insurance an investment at all, especially in regards to how it performs, but it certainly is an investment of the clients money if time shares & livestock are investments. I teach agents & clients what specific asset classes should be used for varying intended purposes. Match up the clients intentions, needs & wants from a product & I believe there will be plenty of room for clients & advisors & agents to utilize all the proper products.

Just Google "worst investments" & you will find that most are not SEC regulated securities as the writers & experts on the topic of money tend to used the word investments for merely things you spend money on & use as an excuse to say they are investments, not spending: https://www.mybanktracker.com/news/avoid-worst-investments-ever

 

[Lloyds of Lubbock]

http://www.kofcknights.org/Photos/THELAUGHINGBANKER.pdf