My first inclination is to begin this entry with a rant regarding how incredibly stupid people in general can be (myself included), but instead I'll just tell you what happened.
Cell phone rings...
Husband answers, "Hello!"
Stupid man, "Uhh....this is A___. Um...I...uh...we've decided not to go with your company's policy...we're going to just stick with what we've got."
Husband replies, "So you're going to stick with what you've got?"
Stupid man, "Y-y-yes. We're going to stick with what we've got."
Husband, "Help me understand this for a minute...we can give you three times the coverage for half the cost....your other policy is going to be VOID in under 10 years if you don't pay higher than normal premiums,by that time, there's a good possibility you won't even be insurable later, PLUS your cash value will be surrendered back to X company, leaving your wife and kids without anything when and if you should die prematurely, and you want to stick with what you've got?!"
Stupid man, "Yes. Um...well...I know that if I die, C____ and the kids may not have anything, I mean..my policy may not be worth anything...but we're gonna stick with what we've got."
Okay, people...help ME out here...of the 68% of Americans that have life insurance, 86% have the WRONG kind. This man has the WRONG kind. He has whole life or cash value...something that builds up cash and was sold to him as an "investment vehicle" for his retirement. What his insurance agent (his uncle) DIDN'T bother to tell him was that the cash that has been building up in his account for the last 20 years would be "surrendered" back to the insurance company when he dies and his wife would only get the face value (which is very low and will not cover her actual needs), if that.
See...he has a "paid up policy"...what that means is that after 20 years, he doesn't have to pay his premiums anymore...it's "paid up". Well, folks...let me tell you something..."paid up" is just another term for (and please excuse the expression, but it's the only one that fits) "screw-job".
It means that you don't have to pay premiums anymore! Yea! Right? WRONG. You tell me...what company in the WORLD do you know of that can afford to do that? NONE, thank you. Is your auto insurance ever paid up? What about your health insurance? Nope....gee...I wonder why? Well, on a life, it's because the cost to insure as you grow older goes UP.
All that poor man's cash value will go towards paying his policy when he stops making his payment, hence the "surrender" part. YES...the insurance company will RAID his cash value to pay the premiums...and once that is gone? The policy lapses and he is notified that it is no longer of any value. So then the face amount will be gone...as well as the cash. It's a horrendous situation and we see it everyday with folks that have life insurance.
Please don't think I don't care about this man. I do...he's been a close friend of ours for 8 years. He started out as ignorant as to how it all worked...then, once we educated him and he made the decision to continue down the wrong path, he became stupid. I believe in what we do for families...and the life insurance is only a small part, but it's the foundation of the house.
For those of you that have policies...please READ them. If you don't understand what they are saying, I will be happy to help you translate. If you don't have life insurance and own a home, have a family, etc...please consider buying survivor protection - but do me a favor...buy term and invest the difference so you'll have something to show for it when you get old....I can hardly bear seeing people being misled by insurance companies who want to make a profit and couldn't care less about the little man.
Thanks for letting me vent...this is a subject that is near and dear to my heart - my dad had a whole life policy when he died (it was supposed to be for $50K back in 1979) but my mom never saw a penny of it because it was "paid up" and had already been raided by the insurance company and was worthless. I look back to how we lost everything and had to live with my aunt in Alaska and my mom HAD to remarry in order to make it....I just don't want my friends to go through that. I don't want ANYONE else to ever have to go through that.