Almost 50 years ago Halsey Josephson wrote a book titled “The Tired Tirade” as an answer to the critics of life insurance, particularly those critical of whole life insurance. It was an outstanding piece of work, but unfortunately it did not stop the tirade. Financial writers like Jane Bryant Quinn and self-styled critics such as Norman Davey continued the tirade for years, and now we have Suzy Orman regurgitating the same old line.
Given the attention Suzy has gotten from the media and PBS, I thought perhaps she was on to something new and might be worth listening to. But I was wrong. When she said never, never buy anything but term insurance and that whole life was just a rip-off, I realized she had nothing to offer but more of the tired tirade.
When she called whole life a “rip-off,” my mind was flooded with thoughts of people whose lives have been impacted by the whole life policies they owned.
First to come to mind was Switzers, a ladies ready-to-wear store where my mother-in-law worked for over 40 years. Switzers was founded in the late 1920s or early 1930s with $1500 Walter Switzer Sr., borrowed from his life insurance policies. Switzers grew over the years with stores all over the southwest and Los Angeles–a very successful operation. But it all started with cash from a whole life policy.
Then there was my longtime friend Willie Benoit. At age 45 Willie had not been able to save money and had never had a savings account with more than $100. When I entered the life insurance business he was quick to let me know he was “insurance poor” and we could stay friends so long as I did not try to sell him more. I put up with this for a couple of years, then one day I said to Willie, “Let me look at those policies that have made you so impoverished.” He agreed, and after a few minutes of calculations I told Willie that he had accumulated over $5,000 in cash value in his policies. He was stunned to learn he was a man of substance rather than poverty. To make a long story short, it changed his life. Saving wasn’t impossible–he bought more insurance–and 3 years later, backed by his savings, he went into business for himself. When he died 20 years later he left a substantial estate for his family. Whole life did for Willie what no other savings mechanism had been able to do.
On a much broader scale I remembered the experience of Walt Disney. When Disney was developing Disneyland he soon reached the limit of credit available for the project. He then turned to the cash values in his whole life policies for the additional funds needed to complete the project. I have often wondered what the return on those funds borrowed from his policies has been in the intervening years. Cash available for opportunity has always been a strong point for owning whole life.
Roe Bartle, Kansas City’s colorful former mayor, speaking at the 1961 NALU convention in Denver, told how his whole life policies saved 5 banks from ruin. During the Depression era “bank holiday,” the federal government shut down all banks until they could prove they were solvent. Bartle said his banks were not in bad shape and with an infusion of a little additional capital they could reopen. He said this was the most frustrating period of his life. He could not sell anything–there were no buyers. He could not mortgage anything–the lenders were all closed. His friends could not help–they were in the same boat. Then he remembered his insurance agent had told him if he ever needed money he could borrow on his policies. He went down to Kansas City Life to see if it was true. It was, and those loans on his whole life policies, along with policies on the other directors, saved all 5 banks. He said the value of having those funds available has been worth millions in the years since.
From my own files I can cite numerous instances where having policy cash value available has saved the day for my clients. Could other savings have done the job? Of course they could have–but they weren’t there, so they couldn’t do the job.
But I also remember a boat ride that shed light on this issue. I was attending a Life Insurers Conference Annual Meeting in Florida where I received an invitation to go sailing on a yacht owned by one of the CEOs in attendance. While sitting in the bow of the yacht, I engaged in a conversation with the CEO of a small member company. He told me that all of his professional life his company had sold only term insurance. He had believed fervently that term insurance was the only kind to own. “But,” he said, “now that I am reaching retirement age I think I was wrong.” He admitted that there was no point in his life when he could not have afforded the extra cost of whole life, and if he had bought it, today he would have something. Instead, he had no significant savings beyond his pension plan, and he could no longer afford the premiums on his term policies.
And there is one final point I can never forget. Fifty-two years ago I was considering a career change. I had a good job but it looked increasingly like a dead end. Gladys and I were children of the Depression and one did not walk away from a good job and steady income into a venture offering an initial cut in pay and an uncertain future. Luckily we had enough policy cash values to ensure 6 months’ income, and on the strength of that we made the move into life insurance. What a wonderful decision for us.
If Suzy Orman’s advice in other financial areas is not better than her tired tirade of life insurance she doesn’t warrant the attention she gets.