Friday, January 9, 2015

Selling "Peace of Mind"

Can any Life Insurance Company sell you "Peace of Mind?"

In the mail today, another pitch for Life Insurance. This time, a pitch for term insurance from "American National Insurance Company" which I know is a good company because it is American and it's National as well, and they have an American Eagle as a logo.  So it must be a good company, right?

They boast they are rated "A" by A.M.Best, which sounds great, until you realize that there are two ratings above this, A+ and A++, which means getting an "A" isn't all that great.

The funny thing about the mailing is that the phrase "Peace of Mind" is blasted all over it - on the envelope, in the letter, and on the many accompanying pages (all different sizes and shapes).

If someone tries to sell you "Peace of Mind", keep one hand on your wallet.
Peace of mind doesn't come from extended warranties, alarm systems, insurance, or other material things.  If you are worried about possessions breaking down, being stolen or damaged, perhaps a better solution is to own fewer possessions - or own less expensive stuff.
Buying a $50,000 car and then getting an expensive "extended warranty" because you are paranoid it will break, is a sure sign that you can't really afford a $50,000 car in your income bracket.
When someone says they are selling "peace of mind", just walk away.  Because what they are really selling you is one acre of blue sky in fee simple, and that just can't be done.  What they are usually selling is a bad bargain - either something wildly overpriced, or just a complete rip-off.
Is "American National Insurance Company" a rip-off? Probably not an outright rip-off (in that they will take money from you and leave you nothing in return).  But rather it is likely a poor bargain.   Why do I say this?  Because they are pitching life insurance to a 55-year-old who lives on a retirement island.   Life insurance for people over 50 is just a sad joke.

Insurance is a young man's game, period.  When you are young, a term policy might make sense, to protect your spouse and children, should you die and your income stream be cut off.   But as you get older, you  have assets to fall back on, and insurance gets very expensive, as it is a gamble that you will die - and you are going to die and very soon.  Vegas doesn't let you place bets with short odds, unless you pay a lot for that bet.

For whole life insurance, which has an investment feature (which I do not necessarily recommend, particularly as a large part of your portfolio), it is doubly a young man's game, as you need time for the investment portion to accrue any value.

So old people have no real business buying life insurance.   You don't need it, and you can't afford it, and no, it doesn't bring "peace of mind" to anyone.

And it goes without saying that babies don't need life insurance, as they have no income stream to protect.

A lot of life insurance is sold to people based on people not understanding what life insurance is all about.   In fact, probably all of it is sold that way.   I certainly know that I did not fully understand the policies that I bought - at the time I purchased them.

But it goes without saying, that if you decide that your life circumstances require that you obtain life insurance, the best way to go about getting it is to shop around with several companies, comparing prices and benefits, and to ask pointed questions about the policies and look for answers in writing.

The worst way is to sign up with some company that you've never heard of, who sends you unsolicited applications in the mail.

Well, that is the second-worst way.  The absolute worst way is to sign up for a policy, thinking that you are being clever because they are not asking any health questions and thus you are pulling a fast one on the insurance company.  Nice try, Cletus.  But life just isn't that simple, and insurance companies are just not that dumb.

But you know, you don't really have to go to any in-depth analysis on this.   As soon as someone says things like "have it all now and pay later!" or "Peace of Mind!" you can pretty much tell a bad bargain is a-coming around the bend.

* * *

So, does "American National Life Insurance" have good rates?  Well, you have to apply to find out.  The application form has all the information to apply - including what bank account or credit card you want debited.  But the actual cost is not listed, and I could not find cost information on their website.

They also operate under "Garden State Life" and "Farm Life" names. I once had a Garden State Life policy - it was overpriced, as I recall, and I cancelled it in favor of another term policy.

Just say "NO" to anything that comes to you, unsolicited through the mail, the Internet, or by phone.   Once you do business with junk mailers, internet SPAMMERs and telemarketers, you only encourage these odious practices.

If you really want a product or service, go out and research it, and find several providers and compare quotes.   You will always get a better deal this way, as the people who junk mail, SPAM, and telemarket rarely have very low prices, simply because they have high advertising overheads.

Just say no.