Beware Buy Now to Lock-in a Lower Cost
Buy Now or Buy When Young to Lock-in a Lower Cost
- A Sales Tactic of which to be Very Wary –
Many believe that it costs less and that a lower lifetime cost is locked-in by buying a whole life policy at a younger age. After all, whole life policies generally have level premiums for life, and the annual premium on a whole life policy issued at any age is smaller than the premium on a similar whole life policy issued at an older age. But assuming that a lower premium means a lower cost is incorrect, and relying on such flawed thinking or advice can lead to some very foolish decisions. For instance, this belief encourages many individuals to have an urgency to purchase a whole life policy now rather than waiting until genuine needs or purchasing capabilities develop. Indeed, the truth is that provided one‟s health or other risk factors don‟t deteriorate, buying a policy early costs more than waiting and buying it later.
But wait, you might be saying, my agent told and showed me the advantages of buying a policy early. The widely-used “Results of Waiting” presentation compares policy values of two policy illustrations, one at the prospect‟s current age and the other assuming the prospect is a few years older (as shown below in Table 1). In summarizing the comparison, agents often comment along the following lines, “By starting now at age 30, you will pay $440 less each year than if you waited until age 34, and, in fact, nearly $3000 less in total premiums by age 65. Yet, at 65 you will have $60,000 more in cash-value. As you can see, buying a whole life policy at a younger age costs less.” Highlighting the illustration-based $100,000+ difference in total insurance at age 65, agents often ask single individuals
Typical "Results of Waiting" Policy Illustrations Summary
Waiting From Age 30 to Age 34 to Purchase a $200,000 Whole Life Policy