I was talking with a colleague the other day. We were discussing recent case work when a fairly new associate came in to the room and wanted our assistance analyzing a case he was working on. His prospective client was considering purchasing a variable universal life insurance policy to fund his children's college education. For the record, this was not our associate's recommendation. Someone else the client had been talking to made that proposal.
The three of us discussed concepts I have openly written about here. Things like saving for education should not detract from retirement funding, life insurance needs can all be defined into "If I die" and "When I die" categories, "If I die" needs are best served by term insurance, "When I die" needs require permanent insurance, but in most cases life insurance makes a lousy investment.
In the course of our discussion we came to the conclusion that life insurance could accomplish the client's goals, but that new tools have evolved which are a lot more attractive. For example, term insurance rates have declined so dramatically that we can purchase the death benefit separately. This leaves the remainder of the budget to accumulate without the drag of insurance costs.
When I first started my career (1989) we still carried rate books, computed premiums on a pad of paper and desktop computers were just being introduced into the business world. The fax machine was a revolutionary method of instant document transmission, but was difficult to deal with as the thermal paper would fade over time and had a tendency to curl up back into a roll. I was proud the day I had a car phone installed so I no longer had to carry bags of coins and search for a pay phone to make calls away from my desk.
Today we send instant e-mails on our laptops, can do complex analysis very quickly, and need to shut off our cell phones so no one calls when we need some quiet time. So many organizations are going "paperless".
Tomorrow someone may look at today's solutions and consider them as inefficient as using whole life insurance for college funding. The tools have changed.
Financial product development is happening with amazing speed. I doubt it will ever slow down.
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