I can even remember where we were sitting. It was a sports bar down in Soho not far from the office of the non-profit where I worked. I was just a year out of college and eager to grow up, so when I met an insurance saleswoman who assured me the mature thing to do was to plan for my future, I willingly agreed to have lunch with her. I ate my greasy hamburger while she delicately picked over her salad and explained the benefits of owning whole life insurance.
She used terms like “the value of money” and “guaranteed cash value” and “tax advantaged annuity.” She patiently explained the importance of starting now while I was young to capture the optimal benefits of this, “the safest of all investments.” Only five or six years older than I, she seemed so knowledgeable and wise. I wanted to be like her. Maybe she and I could be friends. Maybe she could be the big sister I never had and always wanted.
So when she asked me if I was willing to commit, it was an easy decision. “Of course! Why wouldn’t I?” I told her enthusiastically.
Mmm … let’s see. Maybe I wouldn’t because I was making only $18,000 a year and my income barely covered my expenses (New York City in the 1980s was cheaper than now, but not much). Maybe I wouldn’t because I was thinking of going back to graduate school and what little money I did have was all going to saving for that adventure. Maybe I wouldn’t because I was young, and providing a safety net for my beloveds was irrelevant. My parents were financially secure, my siblings were still in the process of launching their own lives, and my boyfriend already had a relatively high paying job. If I was to die, there was no one who couldn’t survive without my paltry death benefit.
None of this stopped me from signing on the dotted line. My boyfriend was confounded. He thought I was wasting (our) money. I didn’t like him telling me how to spend my hard earned pennies. If I wanted to lay the foundation for a responsible future, then it was my choice.
And who knew? He might not even be in that future. As hard as he tried to dissuade me, the more I insisted I needed that insurance policy. It was our first fight about money. First real fight that is. You can imagine how he responded when I put my parents as beneficiaries.
“What are you trying to tell me about us?” he asked. I didn’t have a good answer. I didn’t know what us would be in the future. Anyway, I was doing this for me.
For the next two years, I paid into that policy religiously. Then, I couldn’t any more. Wedding expenses, school loans, a mortgage, all took precedence. Six moves later and the paperwork for the policy itself was lost. Eventually, I let the whole thing just fade away.
Now, it’s become a running joke in our marriage. “Hey baby, wanna buy some insurance?” is the punch line to all manner of sucker ideas from bad investments to even bad restaurant choices.
I could feel stupid about the wasted money, but it is some measure of relief to know I was not alone. Insurance scams are notorious. Helaine Olen details many of them in her easy-to-read and deeply dismaying new book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. In it she writes, “People are routinely sold annuities they have no business purchasing.” Her chapter on the marketing of insurance even has a section called, “There is No Such Thing as a Free Lunch.” It’s a classic sales tactic. Customers are lured by the meal and then feel obligated to reciprocate by buying into the scam at hand. Quoting Dr. Robert B. Cialdini, Arizona State University Regents’ Professor Emeritus of Psychology and Marketing at Arizona, Olen writes, “They want you to feel guilty. They want you to feel like you have to give something back in return.” I know I did.
Olen goes on to discuss one study in which paid actors were sent undercover to pretend to be potential sales targets to various brokerages. The study revealed that although the brokers did almost everything wrong, they were so effective that even the vast majority of undercover actors (those who knew they were there to test scurrilous sales habits) wanted to go back with their own actual portfolios in hand to get advice and buy the exciting new financial products they had been “sold.” The brokers weren’t doing anything illegal, but “they were willing to make the client effectively worse off,” says Olen.
It’s no wonder an inexperienced college graduate was sucked into the scam. The same thing happens to senior citizens every day. I am happy I learned my mistake young. My youthful intentions were good. I wanted a safe and reliable way to save for my future. I wanted to build towards financial independence. In my eagerness, I was seduced into making a bad investment decision.
Hard for me to say it, but my husband was right all those years ago. Insurance made no sense for me then. And, many would argue whole life insurance never makes sense. It wasn’t until after the birth of our first child that we finally got a term life insurance policy, one for each of us. We did so because we are more settled, could afford the monthly payments, and had beloveds who would benefit if we were to unexpectedly die.
When I think about my own children, I know that teaching them about managing money and building a financial foundation is as important as all of the other life lessons I hope to impart. I can’t promise they won’t make financial mistakes, but at least I can do my best to be sure someone won’t be able to say about them, “a sucker is born every day.”
Do you have life insurance? If yes, why? And, what kind did you decide felt right for you?