Agent Owner, Gilmore Insurance Services, Marysville, Washington State
This is another one of those shouldn't you ask Suze about? Suze Orman believes in term insurance for the most part. Her background is as a stockbroker, not as an insurance agent. Her views are shaped by the industry she started in. After the MEC laws came about in the late 80's, you couldn't find many stockbrokers who recommended anything other than term insurance. Probably the biggest reason behind this recommendation was term insurance freed more money for investments which they got paid on, so it made perfect sense to encourage the purchase of term insurance as it freed short term money for investment.
The problem is when your investments don't earn 12% every year and year after year, things may not work out the way you want. You may find you need life insurance longer than you thought. The real problem with following any financial guru, even if their advice is sound, is what happens when things go off path 10% or 20%? Does the plan collapse? Was all the investment return earned just you could pay a much higher premium in your old age because you bought term as a young person?
It's an odd thing to think about in planning but simply ask what happens if you're wrong? How much damage hits you if you guessed wrong about the future? This means taking a broader approach to planning, spreading risk and return to have things work out in different markets. A racing scull is faster than a rowboat, but when a wave hits and flips the racing scull over, but rocks the rowboat, which was a better choice for the body of water?
Regional Marketing Director, Capital Choice Financial Group,
Let me first say that I am not a Suzie Orman fan but her recommendation to buy term insurance instead of the traditional cash value insurance is correct advise. Term insurance offers an individual or family the ability to purchase much more coverage in the early years when debts are the highest and loss of an income would be devastating and as the years pass the need lessens. Another more trusted person that offers the same advice is Dave Ramsey and I urge people to listen to his show on the radio of pick up some of his books. He covers this subject as well as others that will help families to become financially secure.
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The problem is when your investments don't earn 12% every year and year after year, things may not work out the way you want. You may find you need life insurance longer than you thought. The real problem with following any financial guru, even if their advice is sound, is what happens when things go off path 10% or 20%? Does the plan collapse? Was all the investment return earned just you could pay a much higher premium in your old age because you bought term as a young person?
It's an odd thing to think about in planning but simply ask what happens if you're wrong? How much damage hits you if you guessed wrong about the future? This means taking a broader approach to planning, spreading risk and return to have things work out in different markets. A racing scull is faster than a rowboat, but when a wave hits and flips the racing scull over, but rocks the rowboat, which was a better choice for the body of water?