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Selling whole life insurance

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Remember the 1950s sitcom "Father Knows Best," and the always-reassuring advice doled out by its titular character, Jim Anderson (played by Robert Young)? Anderson sold whole life insurance, a product that in the mid-twentieth century seemed a bedrock of stability and prosperity.

Whole life insurance fell out of favor in recent decades, due in part to an investment scandal in the 1990s, but it's had an unexpected resurgence in the recent recession.
Research and consulting firm LIMRA announced at the end of February that strong sales of whole life insurance drove the life insurance industry to its second straight year of growth in 2011. And that's reportedly meant stronger job prospects for life insurance salespeople. 

According to LIMRA, whole life insurance premium rose 9 percent in 2011 over the prior year -- marking six consecutive years of upward growth. In addition, sales of whole life policies rose 5 percent.

So what is whole life insurance, and why is it looking like such a good deal to consumers in the current economic climate? To understand this recent hot streak, it's helpful to compare whole life insurance with term life insurance (which, though it's still the most common type of life insurance, declined in both premium and number of policies sold in 2011, according to LIMRA). Term life covers a person for a set time frame, usually 20 years, and pays a benefit if the policyholder dies during that period.

Whole life insurance works the same way, except that it lasts for perpetuity instead of a set time period. It also includes an investment component. The idea is to build wealth through stocks, bonds or money-market instruments, which will benefit your loved ones when you die. You can also build cash value through these investments and borrow against it. The risky part, of course, is that your portfolio can lose value (though those losses are often capped).

And besides the investment risks, the fees can be steep, which has led some critics to argue that it's better to invest your money elsewhere. Financial pundit Dave Ramsey is one of the outspoken opponents. On his website, he writes, "Do not invest money in life insurance; the returns are horrible. Your insurance person will show you wonderful projections, but none of these policies perform as projected."

Many investors have shared Ramsey's dim view of whole life's moneymaking potential. But during the recession, when stock values plummeted, whole life policies held up reasonably well. That's led to a bump in whole life insurance sales. Buoyed by these encouraging results, some major insurers have begun signing up new life insurance agents in large numbers, according to a story last year in the Wall Street Journal. (Like health insurance, whole life insurance tends to be complex, so it's not so easy to sell online).

These new agents frequently work as independent contractors responsible for generating their own leads. As in other sales fields, the first few years can be extremely tough, with very low earnings. But based on data provided by LIMRA, the Wall Street Journal story noted that those who manage to stick with the job can eventually pull in substantial salaries.

Last Updated: 04/04/2012 - 5:37 PM

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