A ‘Fee-Only’ Financial Planner’s View of Life Insurance

When was the last time you met someone who introduced themselves as a “life insurance agent?” These days, even life insurance salesmen refer to themselves as “financial advisors.” Yet, what advice do you think an insurance salesman will provide? Of course, they will recommend you buy life insurance. To make matters worse, the insurance industry has managed to take something quite simple and complicate it to the point where not even all the people who sell it fully grasp the implications of the product.

So what do Certified Financial Planners (CFPs) who don’t collect commissions on product sales think about life insurance? When is purchasing life insurance appropriate?


Life insurance comes in many forms. Some policies slowly accumulate a cash value, meaning most of your premium goes towards insurance and a small portion goes towards a savings account. When you surrender your policy you may be able to collect this savings account. These products include whole, universal, and variable-universal life policies.

These policies are commonly presented as an investment. But beware! You should always think of life insurance as an expense. When you purchase insurance, you are buying something –peace of mind. Insurance is a way to ensure the financial security of the breadwinner’s family until the family can accumulate enough investments to make insurance no longer necessary. For this reason, insurance is frequently a necessity for young families, and often less necessary for mature families.

Whole Life

Whole life insurance typically requires the owner to pay premiums for the life of the policy. The insurer guarantees that the policy’s cash values will increase regardless of the performance of the company or its experience with death claims. With whole life policies, the interest rate applied to the cash value is predetermined and fixed.

Universal Life

Like all types of insurance, universal life pays a death benefit when the insured individual passes. Before death, however, the cash-value grows at varying rates depending on the ups and downs of interest paid on bonds and savings accounts.

Variable-Universal Life

Variable-universal life policies are similar to universal life policies, except the cash value can be invested in mutual funds (called sub-accounts) rather than at the insurance company’s current interest rates. However, the fees on these policies can be extremely high and in almost every circumstance there are more efficient strategies.


Policies with 100% insurance and no cash values are called term insurance. This is the type of policy most people picture when they think of insurance. You simply pay the premium and collect a benefit in the event of death.

Although there is no savings element to term insurance, remember you are buying insurance to ensure your family is taken care of if something happens to you. In most cases there are more efficient ways to save and plan for retirement than through the purchase of cash value insurance policies.

Insurance or Investment?

A phrase you may have heard when considering insurance is to “buy term and invest the difference.” (You likely don’t hear this from insurance agents because they are paid a higher commission on cash-value policies. The salesman’s commission on cash value policies is often 90% of your first year premium.) To implement this strategy, buy low-premium term insurance from a highly-rated insurer and put the money saved from not buying a cash-value policy into a true investment account like an IRA, Roth IRA, etc. This provides your family with the protection it needs and an efficient way to save for retirement. Hopefully, over time, the investment account will grow and the need for insurance will be eliminated.

Most fee-only financial planners are proponents of the “buy term and invest the difference” strategy. However, there are certain occasions when a cash value policy may make sense. For instance, buying a cash value policy may be appropriate if your need is permanent, such as caring for a special needs child. Additionally, cash value policies may make sense if your need is certain, such as if you have the policy and are then diagnosed with a terminable disease. However, if you need a cash value policy, look for a no-load policy that doesn’t pay the salesman a commission. This can cut your premium in half and you won’t pay penalties when you withdraw your cash value.

Canceling a Policy: Prepare to Pay

Canceling a term policy is simple – just stop paying the premium. If you cancel a cash value policy within 10 years of purchase, you will generally pay a penalty (called a surrender charge) when you withdraw your cash value. If you cancel a variable universal life policy, you will also pay ordinary income taxes on the profits inside the policy. Chances are your insurance agent forgot to mention this.

Bottom Line

Insurance is clearly a complicated product, but for many, it is a necessity. However, remember that insurance agents are financially motivated to sell you insurance, regardless of your circumstances. Always speak to a fee-only Certified Financial Planner, who is never compensated based on the product recommended, to get an objective opinion of whether you and your family have adequate insurance coverage.


Pet Insurance – What Does This Insurance Typically Cover?

If you are looking for the pet insurance policy than you should know that these are things for which your pet will be covered. If you want to select the best pet insurance policy you can find it by searching for the best provider and the policy that suits to your pet’s need. Firstly you need to do some research work and find the best providers of pet insurance policy. Before this you should know the needs of your pet and then select the policy accordingly. There are various things that should be covered in an insurance policy. Before buying a policy you should check it that these are things that will be covered in the insurance policy. Following are main things that should be covered in a good pet insurance policy:-

1. Vets’ Fee:-

The best pet insurance should cover vet’s fee. Today Vet’s fee is quite high and it can disturb your daily budget. So to avoid these unexpected expenses you have to buy that pet insurance policy which will cover your vet'[s fee also.

2. Theft and Straying Cover:-

A good pet insurance policy should also give cover for theft and straying. If your pet got stolen by thief than insurance company should reimburse your pet’s cost. You should check for it before buying an insurance policy for your pet.

3. Low Price and high Cover:-

A good plan is that which will cost you less and give you a wide cover. You should compare the different insurance providers and check it out that which is the best policy provider.

4. Third Party Liability:-

A good policy should also give cover you against the third party. In case your pet damages the third party’s property than it should be paid by the insurance company. A good insurance policy should cover it and give protection against third party liability.

5. Overseas Travel:-

A good policy will also give cover to your pet against the overseas travel. Your pet will get full protection while travelling overseas.

6. Death from illness and Accident:-

This is the main point that should be covered in the pet insurance plan. If unfortunately your pet died or met with an accident than it should be covered in the insurance policy.

7. Quarantine Costs:-

Sometime your pet may suffers from these types of diseases. At that time you may have to pay extra money if it is not covered in the policy. So you have to look these things in a policy. You have analyze whether these factors are covered in the plan or not.