Life insurance Rule

Nov 19, 2018

  1. AndrewRoche
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    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?
     
  2. AboutThatLife
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    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.
     
  3. Allen Trent
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    Allen Trent Guru

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    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
     
  4. bmarsh
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    bmarsh Super Genius

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    Just show the cash accumulation from the life insurance, it is not necessary to compare it to a savings account or investment, they can read.

    Just use the illustrations, and explain how withdrawals and loans work, you can let the client use whatever language they want to call it.

    If Mr. Jones wants to call his life insurance policy, his tax-free retirement income savings account investment program...that is fine just don't call it that for him.
     
    bmarsh, Nov 26, 2018
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  5. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    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, Nov 26, 2018
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  6. bmarsh
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    bmarsh Super Genius

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    Your just describing the product, not comparing to one investment or another, although... you can compare the cash accumulation to other products with rates of return...I think most carriers software does this for you.
     
    bmarsh, Nov 26, 2018
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  7. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    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.
     
    DHK, Nov 26, 2018
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  8. AboutThatLife
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    Let's be serious. When an agent calls it an investment what are they normally comparing it to?
     
  9. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    Let's be serious. When a consumer thinks about permanent life insurance what are they normally comparing it to?
     
    DHK, Nov 27, 2018
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  10. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    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.
     
    DHK, Nov 27, 2018
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