Scott Adams recently made an interesting point about the American presidential candidates in his blog. Disavowing Trump.
“Here’s a quick thought experiment: Assume every bad accusation about all of the candidates is 100% true. Then watch in awe as it doesn’t change your opinion on who you support.”
The thought experiment points out that beliefs are mostly emotional. It is like Michigan versus Ohio State, The Leafs versus the Canadiens, or the Hatfields and the McCoys. My son Peter has pointed out to me before that you cannot change a belief using reason unless that belief was acquired using reason. Knowing how the person has come to believe what they believe is as important as knowing what they believe.
Now let’s turn the experiment around.
Suppose all the good things you have been told about cash value life insurance policies are 100% true. Consider that for a moment.
Thought experiments don’t take as long as real experiments but they do not provide instant and useful answers. Think about it.
Still don’t want to buy any, right?
You hold the negative belief honestly, but you do not know how you came to hold it. Let’s try finding out why.
The most common reasons people don’t want life insurance are:
- Objection: Life insurance companies make too much money, that cannot be good for consumers.
Information: They make a lot of money and they hold a lot of risk; some of it decades in the future. What they make and keep provides a cushion. With participating policies the extra they keep is negligible. I suppose it is possible to find a company that is losing money. Would your financial safety be well placed with them?
- Objection: Many financial authors claim life insurance policies are a bad deal.
Information: That is true, many do. In almost every case, the comparison is not a realistic one. You cannot honestly compare returns in the stock market to the long term yield on life insurance investments. They are based on different premises. Life insurance relates to fixed income investments not the stock market because life insurance companies prefer predictability to yield. They cannot risk claims in a period when the markets are down. They are big enough that the reduced yield does not hurt their ability to pay. If you are willing to die to get yield, a 3-year-old life insurance policy will pay out more than any stock market investment. Again different rules.
- Objection: It is like betting against the home team.
Information: If you, all by yourself, are the home team then that is true. Most of us have a bigger team. Family, business partners, lenders, and the government all need money when you can no longer earn it. You buy it to resolve their issues not your own.
- Objection: I don’t want to be insurance poor.
Information: Most people believe they are insurance poor if they don’t like paying the premiums. But, there are two ways to be insurance poor. 1) Pay premiums for the wrong amount of coverage or the wrong kind of policy and 2) Have too little coverage if the insured event occurs. Poorly handled, someone will be insurance poor. That’s why you use the services of an advisor who can fit the budget and the risk to the proper policy.
Be cautious with beliefs that are not founded in reason. Dig a little deeper. Understand the meaning of your decision.
Sometimes beliefs alone, will lead you astray.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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