First Experiences with Life Insurance

When I was a young lawyer back in the mid-1980’s, I worked for a law practice that provided prepaid legal services to employees of a big company.  I did a wide variety of legal work in that role.

One day an employee about my age came by the office with a universal life insurance prospectus in his hand.  He wanted me to take a look at it to give him advice about whether he should buy the policy or not.  Well, I had no particular expertise with regard to life insurance at that point in my life.  I was a relatively new lawyer, single and poor.  I’d never bought a financial product in my life—certainly not any life insurance.

So how did I handle the situation?  I did what most lawyers would do when asked to evaluate a financial deal—I read the document.

Notice that I said that the universal life policy came with a prospectus back then.  These days most universal life contracts are not required to have a prospectus.  But in the early days, when the rules weren’t really settled, some life insurance companies provided them.

Reading the words in the document—I think it was about 50 pages—made me realize that it was almost impossible for a non-expert to understand how that policy worked.  I remember trying for about half a day, and realized that I wasn’t going to be much help to my client.  I don’t remember exactly what I told him, but I think I asked him whether he trusted his agent.  If the answer was yes, he should buy.  If the answer was no, he should refuse the policy.

It’s pretty much the same advice I’d give to a client today.

Sometime later, another client brought by a universal life computer illustration to the practice.  Since I was the office expert on universal life—due to my experience with the prospectus–the task fell to me.

The client had purchased a policy about four years before, and had the illustration that she been given when the policy was purchased.  She wanted to know if she could stop paying the premium for the policy, but still continue to grow the policy’s cash value.  I thought I could help her figure it out by looking at the papers she’d brought along.

I didn’t know it at the time, but my understanding of universal life was inadequate for the job.  I remember talking to the client, and then discussing the situation with the agent.  I also remember the agent being frustrated because he couldn’t make me understand the difference between the policy’s actual performance and the growth predicted on the illustration.

At the end of the day, the client took back her papers and resolved to contact the insurance company directly.  That was a relief for me, because I didn’t have a better idea of what to do.

Both those experiences were embarrassing for me, because clients came to me expecting that I would have expertise with regard to how life insurance, and especially universal life, worked.  I thought I could understand the products.  After almost twenty-five years in the business, I now feel like I’d be able to help someone understand.  It’s a main reason why I decided to write “What Most Life Insurance Agents Won’t Tell You.”

This post is designed to help educate readers about general matters.  If you need specific advice you can rely on, please consult your professional advisor.