Much like our own mission at the LIFE Foundation, the job of a personal finance journalist should be to inform and educate people to help them make smart financial decisions. Yet in a recent article from SmartMoney (10 Things Life Insurers Won’t Tell You), reporter Jilian Mincer leads her readers to the conclusion that the life insurance industry is not to be trusted and may even be out to take advantage of you.
To insinuate that life insurers will not pay a claim when a policyholder dies is just plain wrong. Life insurance companies pay out billions of dollars in life insurance benefits every year. According to the ACLI, life insurance beneficiaries received $59 billion in 2009, which doesn’t begin to factor in the amount these same companies pay out for annuities or to disability insurance and long-term care insurance beneficiaries. In fact, it’s hard to find a better example of financial services companies making good on their financial obligations and looking out for the best interests of their clients than in the life insurance industry.
Life insurers are stable and regulated and in the extremely rare scenario that one runs into problems, there are safeguards in place to ensure they will be able to make good on their promises to policyholders. Pointing to decades-old, obscure situations just complicates the issue when there are stories every day of real people benefiting from policies and there are easy steps policyholders and beneficiaries can take to take personal responsibility for claiming benefits they think they are owed.
In addition, any time you hear one-size-fits-all financial advice, you know it shouldn’t be trusted. To say that “term is all you need” is only telling part of the story. Term life insurance is certainly a cost-effective way for many people to get life insurance, but there are situations where a qualified insurance professional wouldn’t advise that it be the only life insurance product in your financial portfolio. Parents of a disabled child who requires long-term care services for the rest of his or her life have a need for life insurance beyond 20 or 30 years, if they want to provide for that child after they’re gone. Or what about the person who has a family history of heart disease and runs the risk of being diagnosed after their term insurance runs out? Permanent life insurance provides guaranteed insurability, not to mention cash value that can be accessed no matter what life throws your way.
The latest numbers from LIMRA show that almost two-thirds of insured adults own some type of permanent life insurance. I doubt that many people would so willingly let go of their money if they thought it was a bad deal. The truth of the matter is that people who have purchased permanent life insurance have taken the time to sit down with an insurance advisor they trust and evaluated their individual needs and determined it made sense.
Thirty percent of US households today have no life insurance and more than half (58 million) say they need more—the highest level ever, according to LIMRA. Now is not the time to be fueling misperceptions that could discourage people from getting the financial protection they so desperately need. It’s simply unnecessary for a well-respected publication like SmartMoney to have headlines like “we’re in bed with your boss” and “paid-up doesn’t mean we’ll pay out.” Next time, leave the sensationalism to the gossip columnists and keep it off the personal finance page.