Fraternity-Testvériség, 2011 (89. évfolyam, 1. szám)
2011-01-01 / 1. szám
Fraternity! Testvériség The Case for Permanent Insurance Kathy A. Megyeri T erm insurance has been oversold to middle-class investors, but savvy and the more wealthy investors know that real value is found in permanent insurance. Phil Bodine, a financial advisor from Fort Wayne, Ind., says, “I love working with people who want to buy term insurance. I’ve been doing this for more than 17 years and when I meet a client who demands term insurance and is averse to permanent life insurance, I know that’s going to be one of my best permanent insurance sales because they just don’t know how the product works. I truly believe if people understood, they’d buy as much of it as they possibly could.” Leslie L. Megyeri, President of the Hungarian Reformed Federation in Washington, DC, fully agrees with Bodine. He takes every opportunity to tout the value of permanent life insurance and repeatedly cautions that people don’t understand the value of life insurance because they have never experienced a death claim. It’s then, he says, that the magic of life insurance becomes evident, “five never had a member call me to say that he had too much cash value at a time when he needed a loan on his membership certificate or a beneficiary tell me that he did not need the death proceeds. Most people I talk with claim they only want term insurance and then they can invest the difference instead of buying a permanent life insurance policy. Unfortunately, very few people invest in a wealth-building account that has a guaranteed return and that can be sold on short notice in case the funds are needed. Also, insurance proceeds are tax-free to the beneficiary, and they are protected from creditors. I ask those same clients who want term insurance what will happen if the policy terminates when your health fails and you cannot renew it or cannot afford the premium payments. Permanent life insurance, which those same people claim is the worst “investment,” becomes the best “investment” at death because the cost has been pennies for each dollar of death benefits provided. Your membership certificate pays the maximum at a time when it may be needed the most. It can be purchased on an installment plan but your family does not have to finish paying for it. It is tangible evidence of your caring for your loved ones. Lastly, it can lend you money when you most need it. Therefore, permanent life insurance is a good “investment” as part of your financial portfolio, and you should consider purchasing it to the extent of your financial situation.” In spite of the advice that Bodine and Megyeri offer, many clients, insurance agents and financial advisors still don’t fully understand and appreciate the value of permanent insurance. One agent, who represented a huge national carrier for more than four decades, said he was amazed at all the benefits of permanent insurance when he examined its potential. These are some points fraternal agents or branch managers should share with potential investors to convince them that permanent insurance can cover so much using “double or triple-duty dollars”: 1. Leverage Clients need to use leverage to accumulate wealth and then to spend their wealth in a leveraged manner as well. But this is a strategy that is to a large extent lost on middle-class Americans. However, the wealthy understand it and use it to their advantage. Let’s examine those who have become wealthy in America. They’ve saved some money, they’ve been frugal in their spending relative to their income or they’ve leveraged their money. Life insurance frees people up to take advantage of leverage. However, the middle class has been taught to pay off their debt, invest money in a 401 (k) and then they are set for a good retirement life. However, a wealthy American would use permanent insurance’s death benefits to leverage his home, buy another piece of property and maybe invest some money in municipal bonds. The interest alone from those bonds would pay the premium on the insurance membership certificate, which grows in value. If the value of his home, for some reasons, decreases, he’s still financially sound because he’s locked into a mortgage. His credit score hasn’t been affected and he has maxed out on his tax deductions. If something happens to him, his leveraged dollars ensure that his wife and children can live comfortably because his real estate investment has grown and his municipal bonds have been a good investment as well. The numbers support such advice. If the statistics for term insurance are examined, one would see that very few death claims are paid because the policy usually expires before the insured person does. The mortality tables prove that if a person wants his death benefit to be in place when he dies, not if he dies, permanent insurance is the best and only solution. Even better, the permanent life membership certificate can be used for collateral, to pay estate taxes if needed, to provide protection to keep the certificate’s owner viable as a supplemental retirement benefit if the owner decides to cut his work life short or to sustain his family if he dies. Permanent insurance covers all of one’s life vagaries. When clients claim they want to buy term insurance and invest the difference, they usually don’t follow through on their investment plan. Another misconception is that one’s needs will be less in retirement and that during their working lives, they’ll earn so much money that they won’t need life insurance because
