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Term insurance is not always the right choice

Financial advisors should never have a bias, right? Their recomendations must always be based on their client’s needs and goals, right?


But sometimes advisors do have a bias towards a certain product, company or strategy. Maybe they have a good reason, from personal experience or research. Good.

But maybe they just have a bias.

I find this is the case when it comes to life insurance. Too many advisors take a simplistic approach: “Buy only term. Whole life is bad.”

Not really.

There are many circumstances in which consumers buy whole life – really, permanent insurance – because it is exactly the right choice. Here are some samples from my files:

William and Mary, a wealthy couple, bought a joint survivorship policy to pay estate taxes upon the death of the second spouse.

Business owner Ben took out a cash policy on his CEO Kate, to function as both key-person coverage, and as an executive bonus.

Liilian, a single mother, bought a permanent policy to fund a special needs trust for her disabled daughter Janice.

Mike, a savvy investor, took out a policy with strong cash guarantees to serve as the conservative portion of his portfolio.

Rachel and Mark use universal life policies for both the survivor benefit, and also the living benefit to cover potential long-term care expenses.

Bob needs a permanent policy because of the likelihood his children will remain financially dependent on him longer than expected, and his parents may also need his support later on.

Margaret is a Diabetic. She took out a whole life policy on her young daughter, in case the child also becomes a Diabetic and might have trouble getting coverage when she gets older.

There are many other examples as well. The bottom line: you can’t use a cookie-cutter approach when advising your client about life insurance.

Or anything else, for that matter. Different strokes for different folks.