An insurance agent was looking to sell me a ‘retirement plan’ but the contract states ‘life insurance’. How can I know for sure what I’m getting?
UPDATED: Feb 11, 2013
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Asked February 11, 2013
"Let the buyer beware" is a slogan with its roots in ancient Rome, but the truism works just as well today, for products like insurance as well as objects that can be bought or sold. Not every agent is going to have your best interests at heart, and it is not unusual for such a salesperson to try to talk you into something that is not what you really wanted to buy. Before you buy into a financial tool or insurance policy, make sure you fully understand the fine print behind the contract.
It makes sense to purchase one or more life insurance policies as part of your retirement plan, but not as the plan itself. However, some types of whole life insurance policies could be misconstrued as a retirement plan, especially if you buy a single-premium policy or begin the coverage at a young age. In those cases, the policy would be able to build cash value more quickly, and could serve as a minor financial supplement in your golden years.
The same is true for those who make the right picks in a variable universal life insurance policy. But picking the bonds, mutual funds, or stocks that are going to skyrocket in value is not a simple task, and far more people end up with the face value of the policy when they die than those who earn a sizable income on their investment choices.
Another option, which could be mistakenly purchased as a retirement plan would be a joint last survivor insurance policy. In this type of policy, the surviving spouse would receive benefits for some or all of the rest of their lives when the other partner passes away. It is important to note that this is not going to provide retirement income for both partners, but only dividends for the one who lives longest.
Purchasing an annuity is probably a better option than buying a life insurance policy for your retirement. It is not unusual for a life insurance agent to offer annuities or other financial tools along with the insurance policies they sell. In an annuity, the money would accrue in the account for a specified number of years, and then begin to make payments based on how much interest has occurred, the amount you have invested into it, and how long the account has been active. Annuities are similar to a savings account, but have the potential to earn a great deal more and offer a wide variety of options for dispersing the money once it begins to accrue.
Answered February 11, 2013 by Anonymous