Understanding Life Insurance - Part 3

As you try and learn how to deal with today's complex world of finance, remember that financial reporters have conflicts of interest in their dealings with the consumer also. The reporters must cater to the needs of editors, who in turn need to generate sales of their publications. Many a publication has been responsible for causing confusion and fear in the public and has made people feel stupid if they bought other than no-load products on their own, using only the help of one publication or another.

In too many cases, the result has been inaction on the part of the public. People tend to do nothing because they don't know what to do. Money these people should invest may languish in money-market funds and certificates of deposit, earning returns that will not accomplish their objectives. Worse yet, that money may hop around among the latest hot tips in the press and generate a great deal in the way of expenses and taxes, but little in the way of return.

This is the real cost of the conflict of interest in the media this and attracting people to investments that are inordinately high in price and panicking them out when those investments are inordinately low in price. Buying high and selling low causes some people to never invest again. The real cost of the "by self" method of investing and financial planning can be far more than will ever be incurred by paying an empathetic, caring, competent intermediary who is trying to earn your business for life.

People often underestimate the importance of understanding life insurance products. Just the word "premium" can be confusing when dealing with investment types of life insurance. To most people, "premium" as related to insurance means "cost." However, as you will learn, the premium you pay and the cost of the life insurance can be very different in investment types of life insurance.

The amount of the premium and the amount of that premium that gets to their investment account may look small relative to the death benefit in the early years and thus not important. However, over the years your capital builds up in the contract, and one day you will consider it "important money." You will be very disappointed and chagrined if you did not take the time to invest it wisely. The bottom line is that too much money is tied up in the life insurance products of today to ignore their investment performance.