The Life Insurance Choice Dilemma

Too many choicesToday’s tumultuous economy and changing consumer attitudes make the life insurance purchase decision challenging. Both term (temporary) coverage and permanent coverage have their relative advantages and disadvantages. Here, in brief are the choices:

Term Life? This provides an affordable entry point, but  coverage is temporary. The cost of insurance increases over time as the insured’s life expectancy decreases, eventually making coverage less affordable.

Permanent Life?  Permanent policy options can be complex and confusing:

  • Whole Life provides protection to at least age 100, but tends to be more expensive, difficult to understand, and inflexible.
  • Variable Life allows for improved cash value potential, but exposes the buyer to market risk.
  • Universal Life is interest sensitive, and policies purchased during high interest rate periods  suffered adverse performance as rates declined.

What Consumers Want: Control, Clarity and Value


Given all these choices, how can consumers decide which product is best suited to their own needs, circumstances and priorities?

A recent study by LIMRA and LIFE Foundation  can help shed some light on consumer priorities. While individual circumstances will vary, the study shows that general consumer insurance buying patterns and  priorities have changed over the past 15 years.

The study’s  findings strongly suggest that life insurance shoppers, influenced largely by the internet, tend to seek these 3 things:

1. Control/Flexibility

  • 26% say they prefer to purchase life insurance by internet, mail or phone.
  • 64% still prefer to buy from an insurance or financial professional face to face (although this is down from 80% in 1996.)

2. Clarity/Simplicity

When asked what factors matter most to them in buying insurance, consumers cited:

  • #1: Understanding what they’re buying (36%.)
  • #2: Obtaining the proper coverage amount (22%.)

3. Affordability/Value

Although the cost of basic term life has fallen by about 50% over the past 10 years, consumers are still concerned about the price of coverage:

  • Cost is the top reason people give for not owning enough life insurance.
  • Men place value getting the best price more than women: 17% vs 11%.

And in the wake of the 2008 recession and the weak recovery, there is also increased sensitivity to risk and volatility, making the stability of guarantees more important.

How Guaranteed Universal Life Fits In

Responsive life insurance companies are addressing consumer demand for control, simplicity and value with a new generation of guaranteed Universal Life policies.  These new products are designed to meet consumers’ needs while overcoming the challenges that the older generation of Universal Life policies encountered. Here’s how:

1. Clarity/Simplicity: Universal Life (UL) is based on a comparatively simple and transparent design (as illustrated below). It provides a clever way to combining term life insurance with a saving plan:

  • a portion of your premium pays for the cost of insurance.
  • a portion is reserved as cash value that can be used in the future to reduce the cost of insurance and provide cash when you need it.


2. Control/Flexibility:

When times are hard, the cash accumulation fund provides a cushion that can allow you to skip premium payments, and when times are good, there is flexibility to increase your premium payments to enhance that savings element. You can decide how much of your premium dollars go to savings to generate more significant cash values that accrue tax deferred and can be used for contingencies such as:

  • Unpaid medical bills – Few people anticipate the need for additional money during a prolonged illness. Cash value in the policy can be withdrawn, or borrowed, to pay medical bills.
  • Higher education – College funds are built over a sustained period of disciplined saving. While funds are not accessible in the early years of the policy, cash values are available when children are ready for college.
  • Retirement supplement – Additional income during the retirement years can be helpful when other sources are not available.

It is possible to arrange to pay a premium for a certain number of years only – such as 10 or 15 years while still guaranteeing lifetime coverage. UL policies also allow for a choice among death benefit options: a Level Death Benefit, in which premiums and interest primarily increase the cash value, or Increasing Death Benefit, in which they are also used to increase the death benefit over time.

3. Affordability/Value: UL provides cost control and value in the following ways:

  • Affordability: While more expensive than term life insurance, UL is less expensive than whole life insurance.
  • Value: Guaranteed Universal Life (GUL) provides the value of guarantees, so that both the coverage and premium level will last to a certain age regardless of current interest or economic conditions. In response to increased life expectancy, some policies provide coverage up to age 121. Policies also provide a guaranteed minimum cash value.

Buying Life Insurance is About More than Price

Under the right circumstances, Universal Life Insurance can provide permanent coverage that stays in force as long as the premiums are paid or beyond. Proper management of the savings component enables the funds to grow tax deferred at a steady rate until the money is needed. Additional standard or optional benefit features provide additional value and flexibility, including:

  • Self Completion: an optional Waiver of Premium benefit will waive the premium payments in the event of disability, allowing the policy to stay in force.
  • Accelerated Death Benefit: This standard benefit enables the policy holder to receive cash advances against the death benefit if diagnosed with a terminal illness.
  • Partial Surrender Benefit: This standard feature lets you take a portion of your cash value out of the policy instead of surrendering the entire policy for the full value, lowering the death benefit by the amount you withdraw.

In today’s volatile economic environment, changing consumer attitudes and priorities have created a need for simple, transparent, affordable, flexible products that provide solid guarantees. Unlike the older Universal Life products that were sold when interest rates were high and lost value as rates declined, today’s Guaranteed Universal Life products have been designed to provide sound guarantees during a time of low interest crediting rates. And with interest rates at their current historic lows, there’s room for future growth over time.

For consumers who are seeking affordable, customizable permanent coverage, it may be time to take a fresh look at Universal Life.



You Are What You Like

 highlights a Cambridge University study that shows how much people’s “likes” on Facebook can reveal about who they are. The study, published online at the Proceedings for the National Academy of the Sciences, focused on what 58,000 Facebook users decided to “like” on sites around the Web. The findings were that a great deal of nuanced information could be ascertained from these clicks about personal traits including:
  • gender
  • personality type
  • political views
  • sexual orientation.
Researchers were able to correctly distinguish between gay and straight men 88% of the time by analyzing the kinds of TV shows and movies they liked. They could also differentiate between drug users and non-drug users with 65% accuracy based on expressed public preferences. “Likes” even showed whether users’ parents had separated when they were young or not.


In some cases, this data could be beneficial to help improve marketing recommendations or  psychology research. But it also raises concerns about privacy. According to researchers:

One can imagine situations in which such predictions, even if incorrect, could pose a threat to an individual’s well-being, freedom or even life.

A reminder: Facebook users can change the privacy settings at the sites they frequent to protect their preferences from the public domain.

There Is No Free Market In Health Care


I’ve been saying this for a long time. Now Steven Brill has documented it thoroughly in his well-researched expose in Time magazine, “Bitter Pill: Why Medical Bills Are Killing Us.”  The cause of rising medical bills is an unregulated medical-industrial complex.

As  summarizes it in Ourfuture Blog as follows:

What serious pundits, policy experts and policymakers have failed to see or have feared to say: There is no free market in health care.

The implications: only government action can bring down the cost of health care. In my articles on the subject, I’ve shown how insurers and employers have been trying to bring the costs down. The problem is: as soon as insurers negotiate prices down, the upstream providers – hospital groups and pharmaceutical companies – just raise them again.

Competition in Health Care Doesn’t Work

Brill exposes the falsity of the glib libertarian/conservative/Republican canard that “competition” can fix the unsustainable rise in health care prices. There is no meaningful competition in an economy in which an oligarchy controls costs. Here are the reasons:

  • Consumers can’t make meaningful choices because the real costs and value of medical products and services is hidden from public scrutiny. 
  • Neither insurers nor hospitals have the leverage to secure better prices with suppliers.
  • Hospitals have the power to set prices well in excess of their costs.

Consumers have no idea what a fair price is, and

Congress has permitted the pharmaceutical industry, lab companies, device and equipment manufacturers, hospitals, nursing homes and others to hide behind a veil of secrecy about the prices they charge, effectively sanctioning massive gouging of patients, businesses, states and taxpayers.

The Public Option Is Invariably the Most Cost Effective

Public delivery systems like Medicare are the most efficient delivery systems for health care around the world, and efficiencies include  low administrative costs and the ability to negotiate prices. But in America, Congress has expressly forbidden it from negotiating fair rates for services. Medicare Part D, designed as a giveaway to insurers, and, by extension to providers, not only privatizes drug coverage, but disallows the government from negotiating prices with providers. Congress has also prevented Medicare from determining which health care goods deliver value to encourage enrollees to select those products.

The Government Protection Racket


giving drug companies the power to set prices without justification, hypocritical Congressional representatives express concerns about the deficit and Medicare’s rising costs, as though they themselves did not create these problems through their own irrational

opposition to government regulation and misplaced faith in the free market to bring down health care costs. But. to be clear,  this is not a political or an ideological issue – it’s strictly a matter of money.

The real agenda of so-called “fiscal conservatives” is to

protect and increase already usurious corporate profits. Adding insult to imjury:

Squeezing Medicare enrollees further by shifting additional health care costs to them, as the deficit hawks propose, does nothing to control spiraling costs. Neither does continuing to countenance the pharmaceutical industry’s practice of setting prices that have no relationship to their actual costs or to what they charge other countries for the same products. The market is broken, and it’s under the control of monopolistic players protecting their economic turf.

The Solution Revealed

The only solution to the problem is balanced regulation. Recall that when healthcare reform was being discussed, the attempt to rein in costs was falsely vilified as “death squads.”

But the Medical Industrial Complex will lose this fight as health care costs continue to grow to a critical point where they can no longer be sustained. Eventually Congress will have to move to control costs. The Romney Ryan plan proposed to do so in the most inequitable way – by cutting benefits to patients. A more moderate government could instead develop government-administered pricing that provides for health care companies to take a reasonable profit through fair and realistic pricing rather than the blatant price gauging that prevails today.

Related Posts:

Health Care Reform:

The Power of Crowds 
‘s Huff Post article, from Crowdsourcing to Crowdstorming, introduces a new form of innovation inspired by crowds.

Established organizations like GE, P&G, DARPA and LEGO have been working with crowds to brainstorm, or “crowdstorm,” while startups like Quirky, Localmotors and Giffgaff have also been using crowdstorming to bring better products and services to market.

Crowdstorming is quickly evolving from simple searches for ideas to more complex interactions in which multiple specialized tasks are provided. Shawn, in his study of 

crowdstorming projects, has  identified three broad categories:

  • Search: including contests searching for the best ideas (such as the X PRIZE and DARPA Grand Challenges.)
  • Collaborative:  This is a collective filter through which people pitch ideas and must receive a minimum number of community votes before it will be reviewed by the company. ( One example is LEGO Cuusoo, where an idea must garner 10,000 votes by the Cuusoo community before it will be reviewed by the LEGO team. The community also offers feedback on possible refinements. 
  • Integrated.

Advantages of Crowdstorming



When ideas can’t easily be measured, companies tend to place their faith in “HIPPOS” (highest paid person’s opinion). However, crowdsourcing opens up new opportunities that HIPPOs can’t deliver – brainstorming doesn’t just source ideas, but helps evaluate and build on them as well.

More Insights: By replacing some of the traditional research and development organization with crowds, companies can obtain broader and more comprehensive feedback. Shaun references a 1-9-90 interaction pattern to illustrate:

For each participant submitting an idea, nine participants might offer feedback in the form of votes, ratings or comments, with the remaining 90 simply observing the interactions. At a minimum, the move from search to collaboration results in an order of magnitude increase in the number of participants and an explosion in interactions.

Broader Scope of Ideas: Forums run by companies like Quirky and Giffgaff offer new insights, not just in production of products and services, but everything from compensation to recruiting. Their crowds are not just helping to produce products and services.

“Education can’t be taught.”




austerity poster

Kuttner understands proven economics. He writes:

Despite the sheer unreality of their claims, the austerity lobby keeps winning by defining the terms of debate. Nearly everyone, right, center and left, is arguing about the economic recovery in terms of what the debt-to-GDP ratio should be in 2023.

People: this is the wrong debate. Has any of these worthies taken a macro-economics course? If you slow down growth by excessive belt-tightening, tax revenues fall and the deficit goes up. You can’t just assume that very dollar of deficit reduction equals a dollar credited to reduction of the debt ratio. For budget wonks, this very useful piece by EPI’s Ethan Pollack lays it all out. President Obama should read every word of this.

In what passes for the debate about the budget and the economy…the main driver of rising deficits over the long term is Medicare. You fix Medicare by reforming the larger health system of which it is a part, not by sandbagging the rest of the budget and economy.

In sum: unless we stop obsessing on cutting the debt ratio as an end in itself, we are condemned to a decade of economic underperformance. President Obama got some nice political lift from his re-election and his new, more assertive tone. But he (and the economy) are still dragged down by the undertow of bad economic assumptions that continue to contour the debate.

Robert Kuttner is:

  • co-founder and co-editor of The American Prospect magazine
  • a Distinguished Senior Fellow at the think tank Demos.
  • was a longtime columnist for Business Week.
  • a writer whose articles have appeared in The New York Times Magazine and Book Review, the Boston Globe, The Atlantic, The New Republic, The New Yorker, Dissent, Columbia Journalism Review, Harvard Business Review, and The New England Journal of Medicine.
  • a columnist for
  • author of  “The Squandering of America, exploring the political roots of America’s narrowing prosperity and the systemic risks facing the U.S. economy”  – his seventh book.
  • Winnder of the Sidney Hillman Journalism Award for that book.

Bob’s best-known earlier book is “Everything for Sale: The Virtues and
Limits of Markets (1997),” which received a page one review in the New York Times Book Review. Of it, the late economist Robert Heilbroner Robert Heilbroner wrote:

I have never seen the market system better described, more intelligently appreciated, or more trenchantly criticized than in Everything for Sale.

Bob’s other previous books on economics and politics include; The End of Laissez-Faire (1991); The Life of the Party (1987); The Economic Illusion (1984); and Revolt of the Haves (1980).

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