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The Savings Dilemma of Traditional Insurance

by Dr. Dan Strain

129 pages; quality trade paperback (softcover); catalogue #02-1132; ISBN 1-55395-417-3; US$15.95, C$24.88, EUR16.20, £11.30

Eliminate frustration and confusion about the value of Life Insurance policies. This approachable book reveals the costs and benefits of various types of life insurance policies, annuities and investment options.

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about the book      about the author      sample excerpts or Table of Contents      catalogue info

About the Book Due to the wide variety of life insurance products,investment options and annuities, with their unique contractual provisions; prospective and current policyowners and investors experience tremendous frustration and confusion over the value of life insurance contracts, in comparison with other investment vehicles and strategies. Insurance logic dictates that the bottomline is that neither whole life insurance nor traditional investment vehicles such as stocks, bonds,IRA's, etc. can replace the other. Instead of relying either on life insurance policies or conventional investments the public should create a composite portfolio that consists of a mixture of both. The importance of this book lies in its illumination and clarification of the various types of life insurance policies, annuities and investment options that are sold to the general public. Currently many prospective investors and policyowners are confronted with a confusing array of investment and insurance options. This book will assist all consumers in making difficult insurance choices.

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About the Author Dr. Dan Strain is currently chief executive officer of Paradigm Financial Group, LLC located in Columbus, Georgia. Dr Strain started in the financial services field on March 13,1972. In order to enhance his knowledge in the complex field of insurance and finances, Dr. Strain pursued advanced courses from what is the industry's premiere institution, THE AMERICAN COLLEGE Here he earned the designation of Chartered Life Underwriter (CLU) OTHER DESIGNATIONS: Registered Health Underwriter (RHU) 1979 Life Underwriter Training Council Fellow (LUTCF) 1985 Registered Financial Consultant (RFC) 1993 Licensed Counselor (GA) Certified Elder Planning Specialist (CEPS) 1998 EDUCATION: Auburn University Bachelor of Science in Business 1969 Northwestern College of Allied Science MBA 1980 Kennedy-Western University PHD October 2002 ORGANIZATIONS: National Association of Life Underwriters Columbus, Ga Chapter of CLU/CHFC Member Columbus Estate Planning Council

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Reviews

Insurance executive writes savings book, sells it 'on-demand'
By Tony Adams

Dan Strain has been in the insurance business 31 years and believes he knows a thing or two about planning financially for retirement and death.

That's why the chief executive officer of Paradigm Financial Group in Columbus recently authored his first book, "The Savings Dilemma of Traditional Insurance."

Strain, 55, said the book is aimed at people who need help planning for their futures, as well as insurance firms that need help in training sales staffers.

"If somebody would read that book, maybe a young married couple that's thinking about buying insurance, they'll understand about all the types of term insurance, all the annuities, all of the investments," said Strain. "The book can help them make important decisions for their life."

At the same time, Strain said, "I'm hoping that corporations...those huge organizations that have a field force of 10,000 to 15,000 will look at this. They could save themselves thousands of dollars in training costs because every company has certain books they give newly recruited people in the insurance and financial services industries."

The executive is certainly thinking big, but publishing small. He is using an on-demand publisher to get his words out to the world. Trafford Publishing, which has offices in Victoria, Canada, and New Bern, N.C., printed a few copies of Strain's book in January. He purchased about 50 copies himself ($6 apiece for the author) to promote the book.

There was no thought of taking the traditional publishing route, said Strain, a Lee County, Ala., resident.

"It didn't make sense to buy a bunch of books and put them in a warehouse," he said. "That's what most book publishers want you to do. If I want to order a hundred books, I can call and order them and they just run them through the computer press. They can have them in three days."

For now, "Savings Dilemma" can be purchased for $15.95 from the publisher's Web site, www.trafford.com. It also has been listed with one Canada's largest Internet book sellers ­ Chapters.indigo.ca. By late March, Strain said, the company has promised to have him listed with the online bookstores of Amazon, Borders and Barnes & Noble.

Strain also is working on book-signing opportunities with a couple of local stores.

"It's picking up a lot of steam," he said.

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PUBLISHING ON-DEMAND

On-demand publishing is an alternative for getting one's words into print without the truly major costs associated with large publishing houses. For instance, Victoria, Canada-based Trafford Publishing offers book packages [ranging from $699 to $1,949. The highest fee includes help with laying out and promoting a book.] One possible down side to on-demand publishing is it generally is connected to Internet booksellers, with books not stocked in a bricks-and-mortar store. And it may take a bit longer for the Internet seller to ship the product to customers since, as the name indicates, it is printed "on demand."

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Sample Excerpts

Introduction

       Since the nineteenth century, many people have bought life
insurance in order to prepare for the untimely death of the
primary income earner in the family. At the same time, because
life insurance earnings are not taxed, they have also begun to
play an instrumental role for people to accumulate retirement
savings, while ensuring a death benefit for their beneficiaries
(Martin, "Life Insurance - The Basics," p. 1). From the opposing
perspective, life insurers have also benefited from the interest
in life insurance as baby boomers have set aside more money
for retirement.
       Current marketing indicators include safety, security, protection,
guarantees, risk-bearing and insurance. These messages come from
full financial service providers, not the "traditional insurance
business," per se. New York Life Insurance Company, the No. 2
mutual life insurer in the United States, indicates net income more
than doubled in 2000 on investment gains and higher sales in life
insurance, annuities and international operations ("Net Income
Doubles At New York Life," 2001).
       Nonetheless, many people (including CPAs and other financial
professionals) do not have a comprehensive knowledge of the various
types of life insurance policies and the challenge of maintaining
and managing these policies successfully (Godfrey, 2001).
Currently, there are five major types of life insurance policies
and annuities. The most traditional type of life insurance policy
is whole life. During the 1970s and the 1980s, decades that were
characterized by a drastic rise in interest rates, the life insurance
industry was pressured to produce new types of insurance products
that were interest-sensitive so that clients can benefit from the
high interest rates. The new insurance products include term life,
universal life, variable life and variable universal life (Cunningham,
1995).
       Financial professionals and prospective life insurance policy
owners need to understand the subtleties of the contracts of
their policies in order to be able to make necessary changes to
their coverage in accordance with the inevitable developments
in their lives. For example, term insurance policy owners should
recognize that a convertible provision would enable them to convert
to permanent insurance without incurring substantially higher
premiums and undergoing a re-evaluation of their insurability.
Furthermore, the complexity of many of these insurance products
with their specific provisions that vary from company to company,
along with the volatility of the markets, further heighten the need
for potential consumers to acquire a strong knowledge of life
insurance products and their alternatives so that they can make
informed decisions about their money (Godfrey, 2001).
       In order to enhance the public's understanding of life insurance
policies as a means of providing future savings, this study will
offer a comprehensive discussion of the following areas: 1) insurance
investment options and comparisons; 2) financial planning basics;
3) accumulation and withdrawal strategies; and 4) the relevance of
life insurance policies historically and in the current market
and economy.

Rationale of the Study

       As mentioned in the previous sections, this study addresses the
failure of the life insurance industry to provide accurate and
sufficient information to help potential clients make wise decisions
about their purchases. Because of the competitiveness of this industry,
agents and insurers often generate promising illustrations based
on tacit and aggressive assumptions. If the future reality does not
match these assumptions, then consumers would not be able to benefit
from their policies as presented by the insurers.
       With its concise descriptions of the major life insurance policies,
this study can enlighten prospective buyers of life insurance
policies about their options for retirement savings. For example,
this study includes discussions on the different types of life
insurance policies, the variety of charges involved in maintaining a
policy and the unpredictability of interest rates that will affect
the cash value of most life insurance policies.
       In addition, the different methodological approaches used
in this research study can provide prospective policy owners and
investors with a means of assessing the viability of different
portfolio compositions. Even though these buyers of policies and
investments will likely require assistance from financial
professionals to do their own calculations, it is critical that they
too have a general understanding of the performance of investment
options. The historical analysis of the performance of investment
options thus enables the public to acquire some knowledge of the
complexity of maintaining and managing life insurance policies,
annuities and investments.

Importance of the Study

       The importance of this study lies in its illumination and clarification
of the various types of life insurance policies, annuities and
investment options that are sold to the general public. Currently,
many prospective investors and policy owners are confronted with
a confusing array of investment and insurance options. Life insurance
companies competing with other financial institutions to attract
clients often focus their efforts in selling their policies without
providing accurate information to their customers. Over optimistic
projections of the policies and the future interest rates can
lead to the establishment of targeted premiums that will not allow
policy owners to maintain the policy before their death.
       Therefore, this study provides an overview of the various types
of life insurance policies and annuities so that prospective investors
can be educated about their specific characteristics. Furthermore,
the presentation of the financial analysis of different portfolio
compositions offer illuminating information about how the mixture of
various investment options can be optimized to provide ideal
results.
       The demonstration of the complexity of the different life insurance
products and their financial assessments will hopefully convince
prospective consumers to make informed decisions about the placement
of their savings. Without extensive research and comparison, as well
as the assistance of objective financial professionals, many consumers
will fall prey to the unrealistically optimistic projections presented
to them in life insurance agents' illustrations.

Statement of Problem

       Because of the wide variety of life insurance products, investment
options and annuities, with their unique contractual provisions,
prospective and current policy owners and investors experience
tremendous frustration and confusion over the value of life insurance
policies in comparison with other investment vehicles and strategies.
Insurance logic dictates that the bottom line is that neither whole
life insurance nor traditional investment vehicles such as stocks,
bonds, IRAs, etc., can replace the other. Instead of relying either
on life insurance policies or conventional investments, the public
should create a composite portfolio that consists of a mixture of
both ("The Meaning of Life," 2001).
       Even though life insurance policies are also dependent on the performance
of traditional investments, they should be considered a different
means of providing future financial security. Investments require
investors to take financial risks in order to accumulate income and
take many years to mature. On the other hand, life insurance policies
contain provisions that provide necessary funding to designated
beneficiaries should the major wage earner of the family dies.
Essentially, life insurance policies can protect the family's future
by ensuring that the survivors will be able to build on the traditional
investment options with the death benefit. Therefore, the two types of
products complement each other ("The Meaning of Life," 2001).
       While the diversification of the portfolio is evident, what is less
obvious is how prospective policy owners and investors should allocate
their limited resources among the life insurance policies, annuities
and alternative investment options. The increased number of life insurance
products with attractive features and contractual provisions, along with
the unpredictable changes in the stock market pose a significant challenge
to many people as they attempt to plan for their financial future.
Therefore, they need to acquire a sufficient knowledge of the types of
life insurance policies and annuities that are available in the market.
Furthermore, they also need to have a general idea of the performance of
different types of investments based on a historical analysis.
       Another problem that will be highlighted in this study is the life
insurance agents' use of unrealistic and inaccurate illustrations to
sell policies. By using unrealistically high interest rates and basing
their projections of the returns of investments on current estimates,
life insurance agents often do not communicate underlying risks involved
in purchasing interest-sensitive life insurance policies or annuities.
As a result, consumers who believe these presentations may fail to pay
their premiums based on the belief that their dividends will cover the
premiums after the 11th year, thus leading to the lapsing of the policy
and income tax payments.

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Catalogue Information

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