Have You Ever Heard of Izu's RIPOFF Acronym for Whole Life Insurance?

This is an acronym which allows people to remember some of the major hiccups with whole life insurance.  Typically, something is a ripoff when it surrounds something deceitful.  If these policies were explained clearly, I would just call the policy over priced.  However, time and time again, I see the client purchase the policy thinking one thing only to receive something else when the policy is delivered.

You may review the original posting of the acronym here: sizusfinlit.blogspot.com.

"R" stands for retirement and college savings.  Typically the agent sells an insurance policy as an investment.  An insurance policy is not an investment!

"I" stands for inhibited money transfer.  As soon as you sign the dotted line (okay, 45 days later), you might lose 10,000 if you surrender the policy.  Please, whatever you do, don't ever front load a whole life policy with money.

"P" stands for promised rate guarantees.  The guarantees are typically so complex, its hard to understand what is being guaranteed.  Typically a customer gets a guaranteed rate minus some non guaranteed costs like administration fees and mortality expenses.

"O" stands for optional coverage for life.  As soon as you sign the dotted line, the whole life insurance company will either take your money if you lapse the policy or drag more and more money out of you if you continue the policy.

"F" stands for fraudulent commissions.  Before you sign a contract, shouldn't you know how much the person selling you is getting paid from the deal?  In this case, the commissions can be ridiculously high.

"F" stands for fake tax free retirement.  The tax free retirement promised by whole life insurance companies is a joke.  All life insurance payouts are tax free.  By the way, so are home and auto insurance payouts.  You might want to ask yourself why auto insurance companies don't hold separate accounts.

This post was reposted from http://finlit.biz/life-insurance/have-you-ever-heard-of-izus-ripoff-acronym-for-whole-life-insurance/, originally written on January 23rd, 2013.