Prior to Covid, insurance agents were provided access to SFPD and other jurisdiction’s lineups (roll calls) to pitch their products. It appears that many insurance agents perceive public safety employees’ lifetime of predictable income similar to a highly paid professional athlete—an easy mark. And yet, in 2018, Forbes Magazine rated the product the insurance agents are selling as one of the five worst investments one can make.
My article (below) appeared in the February 2020, Westside Observer print edition, though I never published it digitally. As we unwind from Covid, I am sure the salespersons will be returning to hustle commissions.
Here is my article:
With the stock market hitting severe turbulence, the sales pitches to public safety officers are going to increase about a tax-free, riskless savings and investment vehicle that will grow and escape estate taxes. Beware! Many salespersons cloak the wolf of extremely high-commission whole life insurance products in the sheep’s clothing of an investment product.
It is whole lifeinsurancethat is being marketed to public safety lineups (roll calls) with misleading names such as Super Roth, Lazer Fund, or tax-free investment strategies. The insurance agents unnecessarily use complex language to challenge employees’ financial confidence, tout unrealistic stock market projections, and respond to questions from rehearsed scripts.
This is not an attack on life insurance or the agents’ need to earn a living. However, insurance was historically designed in 3000 BC to protect against maritime loses on the Yangtze River, not as an investment vehicle to grow assets. Fiduciaries — financial consultants that are required to put their clients’ interests before their own commissions— rarely recommend whole life insurance policies.
For a young public safety family, ensuring that a surviving spouse can continue to pay the mortgage and to fund a child’s education, term life insurance (as opposed to whole life insurance) is an essential financial planning tool. As the parents gets older, with mortgage payments and child-raising responsibilities mostly in the rearview mirror, it is generally unnecessary to even maintain a life insurance policy.
Here is an example of the costs of term life insurance versus whole life insurance: Using GEICO’s online term insurance calculator, a 30-year-old police officer can lock in $2 million worth of term life insurance for only $54 per month over a 20-year period. Compare that with a Forbes article that reported a whole life insurance policy insuring $2 million would cost $2,288 per month– fully 42 times more expensive than term life insurance—yet this is what has been peddled at SFPD lineups.
All the other bells and whistles that the insurance agent touts can also be achieved through vanilla investments like stocks, bonds, mutual funds, exchange-traded funds (ETF’s), or real estate investments, because
- you can liquidate these investments at any time, unlike whole life that requires a lifetime commitment,
- money can be borrowed against a house or brokerage account without triggering an income tax,
- the appreciation on stocks, mutual funds, ETF’s, and real estate is not taxed if held until one dies,
- there is no estate tax when a public safety officer dies if their net worth is under $12 million, and
- commissions are being phased out for stock and mutual fund transactions, so all your money immediately goes to work for you. Contrastingly, 80% to 100% of a customer’s first year payment in whole life policies goes into the insurance agent’s pocket.
In 2018, Forbes Magazine awarded whole life insurance as one of the top five worst investment vehicles one can choose. The magazine actually called whole life insurance a “rip-off,” yet SFPD Chief Scott allowed those rip-off pitches to be made to the captive audiences in his lineups. It is time for Chief Scott to protect his officers from these products.
In 1996, I passed the AICPA’s Personal Financial Planning test and I have maintained that designation through the required continuing education. I have passed the California insurance exam. I neither recommend insurance products, nor am I still licensed in insurance, though I have been quoted on insurance products numerous times in the Wall Street Journal. Please contact me if you have any corrections, questions with this article, or for a link to my personal website.