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Let's talk about your death.

Not much of a sales pitch, is it? Yet that's precisely the body under the sheet we're delicately avoiding when we consider buying life insurance.

"They call it life insurance but it's really death insurance. After all, you'll never live to collect," says Judith Hasenauer, a Chartered Life Underwriter, or CLU, and principal at Blazzard & Hasenauer, P.C., a Florida law firm that advises insurance companies. "That's why it's often said that life insurance is sold, not bought."

Perhaps because we are so averse to contemplating our own mortality, certain myths have grown up around life insurance. Myths such as: Life insurance is a good investment. You can't bargain for a better rate. You can always expect full disclosure of commissions. And a guaranteed-issue life policy will always come to the rescue if you wait too long to purchase coverage.

We invited life underwriter Tony Steuer, the director of financial preparedness for the insurance consumer group United Policyholders, along with a life insurance actuary, former Vermont insurance commissioner and Consumer Federation of America expert James Hunt, to join Hasenauer in playing pinata with these overstuffed life insurance myths.

Myth No. 1: I don't need to worry about my health

You've seen those low-cost, no medical exam, guaranteed-issue life policies advertised. The ads promise that you won't be turned down, regardless of your health.

But if you're looking for a quick net-worth boost at death's door or a last-minute cash windfall for your heirs, don't count on a guaranteed-issue product.

"For the first two years, the death benefits are minimal," Hasenauer says. "That two-year window is the suicide period, the contestability window where the company would contest that the information you provided was not correct."

The benefits may step up after the contestability period, but not by much. "They're not very big policies; you could never go and get a good estate planning-type policy," she says. "They're pretty close to burial-type policies -- just enough to get you in the ground and pay the minister."

The cost of these policies reflects their increased risk to the insurer. "They're crazy expensive," says Steuer. "And statistically, less than 10 percent of people will qualify for the best available rates that are offered by insurance companies."

If you're considering a guaranteed-issue product, Hasenauer recommends shopping around.

"There is a (price and benefit) difference between the three-question and the 10-question policy applications," she says.

Myth No. 2: Agents always disclose their commission

Want to know exactly how much commission your agent is making on your life insurance policy?

Good luck finding out.

"It's a real quagmire," says Steuer. "Life insurance is the last financial industry where compensation is not fully disclosed." Instead, it's buried so deep in the contract that it would take a forensic dentist to extract it.

That's by design. The insurance industry has long maintained that divulging the commission on whole life, which Hunt says can typically run 85 percent of first-year premiums with annual renewal commissions of 7 percent for the next decade, could kill the sale.

Despite this dated defense, disclosure is already required overseas.

"It's something that is going to catch on more and more in the (U.S.) life insurance industry," Steuer says.

Until it does, Hunt suggests two workarounds:

  • Compare the first-year surrender value to the first-year premium. The closer the surrender value is to zero dollars, the more money is going into the agent's pocket. There's just one catch: You would have to have purchased the policy to get this information.
  • Get a competing quote from TIAA-CREF, which sells direct policies without commissions. This will give you a rough idea of how much commission your policy contains.

Myth No. 3: Life insurance is a good investment

Life insurance, a good investment? Total fantasy, says Steuer.

"I liken life insurance to the casino industry," he says. "How do you think they get these big, flashy buildings and these solid financials? Not by giving you this really great deal."

Each decade, the industry seems to dream up another sound financial reason for you to "invest" in life insurance. In the 1980s, it was the tax advantage of single-premium life policies, which quickly evaporated when the wealthy started flocking to them as tax havens. Recently, corporate-owned life insurance suffered a similar flash and regulatory crash.

Hunt predicts the current sales pitch touting the tax deferral on the cash value buildup within permanent life policies will turn out to be just wishful thinking for many.

"The problem is, 40 (percent) or 50 percent of the buyers drop out within 10 years and never get a good return on their money," says Hunt. His recommendation? Buy term life insurance and stick the savings in your 401k instead.

Next time you hear the siren song of life insurance "investing," Steuer says turn up your iPod to drown it out.

"Insurance is insurance; it's not an investment vehicle," he says.

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