Beware of Agents Bearing Guarantees

Katt, Peter C.
June 1996
Journal of Financial Planning;Jun96, Vol. 9 Issue 3, p20
Academic Journal
This article discusses the question whether a financial planner would be impressed with exaggerated guarantees or conventional guarantees. The reality is that all policy guarantees are worthless because insurance companies have no right to print money or raise armies. For far too many companies and agents, life insurance selling is a long-running game of "hide the pea"--using one sales gimmick after another to confuse communes in the hope the tactic will result in sales. Policy illustrations have been a major player in this shell game, as life insurance agents emphasize the importance and certainty of projected policy values, only to have customers disappointed as actual policy performance fails to meet the agents' earnest and frequently ignorant promises. Most of the exaggerated guarantees are death-benefit-only guarantees-that is, there is no minimum cash value guaranteed. As such, insurance companies have no ability to protect themselves against external events that could cause their policy guarantees to simply evaporate.


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