The Crimes of Whole Life Insurance Salespeople

One of the most expensive mistakes we see young physicians make is when they succumb to whole life insurance salespeople and buy a whole life policy.  They are lied to about the insurance ‘being a good investment”, and “security for the future.”

Peter Lazaroff makes some good points in his WSJ article “The Case Against Permanent Life Insurance

He notes right away:

Unlike fiduciary advisers, people who sell insurance don’t have to uphold the fiduciary standard. That means they’re under no obligation to work in your best interest. Instead, they can work in their best interest, or the best interest of the company. It’s a sales pitch when you talk to an insurance agent who wants to convince you that permanent life is something you need to buy.

Translate this:  They lie, lie, lie.

Lazaroff goes on to debunk various sales strategies that these bottom dwellers use, such as:

  • “With the growing cash balance, you can be your own bank and take loans from the policy.”
  • “Permanent insurance is a form of forced savings.”
  • “Look at those dividends in the policy. You can’t earn those in your portfolio. Plus, that growth is tax free.”
  • “You already have some of your savings going to retirement accounts. Think of your policy as a form of diversification.”

The article is worth a read.  But I’ll tell you simply-there are only two groups of people that should even consider whole life insurance (in any of it’s many names-universal life, variable life, etc.):  those that need to cover estate taxes on a large illiquid inheritance (your parents left you a large factory) or some families that need to fund for a special needs child or other disabled individual.  That’s it.

The most common scenario we see is a young physician sold perhaps 1 million dollars of a whole life policy, with a premium of 20K plus a year.  This physician may either not need insurance at all (single), or may need a great multiple of this death benefit (three young children and a homemaker spouse).  But the aforementioned whole life policy allows the greatest benefit to the salesperson.

We all learned some great truths in our medical education.   Not buying whole life insurance is one of the great truths in our financial education.

Steven Podnos MD, CFP

Steven Podnos MD CFP attended the University of Florida College of Medicine and trained in Internal Medicine, Pulmonary and Critical Care Medicine at UT Southwestern in Dallas Texas. He moved back to Florida with his physician wife (ENT) and raised a family while practicing Pulm/CC medicine for over twenty years. During that time, he also started and ran a Hospitalist program for several years. In 2002, Steve began a slow transition towards having a Fiduciary Fee Only Financial planning practice-at first just for friends and family. As the practice grew, he transitioned out of full time medical practice to full time financial planning. Dr. Podnos joined the US Air Force Reserve in 2008 as a critical care physician and flight surgeon. He deployed twice to Landstuhl Army Hospital in Germany as an intensivist during the Afghanistan war in 2009 and 2010, and as a critical care air transport (CCATT) physician in Okinawa in July 2018. His firm, Wealth Care LLC now serves approximately 100 physician families nationwide and another fifty non physician families with both financial planning and wealth management. He is a staunch advocate of independent medical practice, believing that the corporatization of medicine and Electronic Medical Records are both harmful to physicians. 

  3 comments for “The Crimes of Whole Life Insurance Salespeople

  1. Bill Ameen, MD
    July 17, 2019 at 9:29 pm

    Everyone I know and read blames the recession of ’09-10 on the big tax cut and the trillion-dollar unnecessary invasion of Iraq.

  2. Bill Ameen, MD
    July 17, 2019 at 9:04 am

    Great post! Couldn’t agree more. Too bad so many young doctors won’t see this, but I’ll educate my medical students at the free clinic I volunteer at. So far the only benefit to me was to borrow against it to help me meet payroll at the office I ran during the last Bush-caused recession in 2009 (a few months before I sold the practice). Five years after retiring I still owe about $20,000.

    • Doug
      July 17, 2019 at 5:54 pm

      Bush caused? Dear god the Bush derangement syndrome hasn’t decreased In 10 years…..let’s assign blame where it is due, we’ll meaning liberal simpletons and their attempt to squeeze unqualified losers into houses they couldn’t afford

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