With all of the recent scandals within the life insurance industry
regarding deceptive and unfair sales practices relating to the sale of
cash value life insurance, how is it possible that companies can still
sell it and what are the inherent problems with the product?

<There are two main types of life insurance. These are term and cash
value insurance. With term insurance you pay premiums to insure your
life and your dependants are paid a sum of money on your death. Cash
value life insurance is a combination of term insurance and a savings
account. Some of the premium you pay goes towards the life insurance
and the rest is invested in a savings account.

For both types of insurance there are also fees. However the fees
associated with cash value life insurance can be up to ten times that
of term insurance. This is because the salesperson gets a huge
commission for selling the policy. The commission earned can be up to
$2000. This is passed on to the customer and recouped in the fee.

A comparison of premiums on the luhman website shows that cash value
life insurance for $250,000 worth of cover costs $3000 whereas for the
same amount of life cover, term insurance costs just $300 per year.

Insurance companies like to sell cash value life insurance because
they earn huge profits from it. Around 25% of cash-value policy
holders cancel their policies within the first two years and around
40% within the first five years. During this time the policy holders
have premiums have gone towards paying the fees.

Customers are often presented with projected returns on cash value
life insurance. However the projections are often vague without
explanations of interest rates used.

The reason that these cash value life insurance policies can still be
sold is that there is no legislation stopping their sale.

The advice from investment experts is to opt for cheaper forms of
insurance like term insurance and to invest your savings in more
profitable forms of investments.>


<Additional links:>

<What kind of life insurance should I buy? by Claire Poole.>
<http://www.firstunion.com/money/life/life2.html>

<4 question to ask an agent if you’re in the market for a life
insurance.>
http://www.mmch.com/life.htm

<Why you should avoid cash value life insurance.>
<http://www.luhman.org/Nts/PerF/120_LifeInsurance.html>

<Evaluating whole life policies: the Barnes test by Janet Bamford.>
<http://www.moneycentral.msn.com/articles/insure/life/1417.asp>


<Search strategy:>

<"cash value life insurance" legislation>
<://www.google.com/search?q=+%22cash+value+life+insurance%22+legislation&hl=en&lr=&ie=UTF-8&start=10&sa=N>

<"cash value life insurance" commission>
<://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=+%22cash+value+life+insurance%22+commission>


<Hope this helps.>