Sunday Gazette-Mail from Charleston, West Virginia on May 19, 1974 · Page 46
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May 19, 1974

Sunday Gazette-Mail from Charleston, West Virginia · Page 46

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Charleston, West Virginia
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Sunday, May 19, 1974
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Page 46
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2ft-- Mav 19, 1974 Sunday Gazette-Mail Wei» Virginia How to But/ r hat Is Interest By Sidney MargoUs Consumer Expert for Sunday Gazette-Mail Can you protect your family better by buying inexpensive tefm insurance or should you payj more for a policy w i t h cash value such as ordinary or whple-life insurance? iVe often have discussed this question in this coiumn -over the past 25 years, in fact. Ifjs one of the real issues behind a long-time controversy over whether insurance com- pariies should disclose the "Interest a d j u s t e d " cost of their cash.value policies. The adjusted cost would, take into account the potential interest which could be earned on the etftVa amount paid for cash- value insurance. Using that nfe-thod, cash-value insurance might not seem as cheap over a 20 or 30-year period as many agents now say it is. ;«Por example, as we reported! previously, decreasing Cerm insurance is the chea- pst kind you can buy. A man qf 35 can buy 30-year decreas- hjg t e r m i n s u r a n c e w i t h $501000 of intitial face for as little as S250-$300 a year. Such a jiolicy would give his family as ;much as $250 a month in- eome if he died the first year. £vith benefits gradually reducing as his family grew older. ·*. · * * * ^MORTGAGE INSURANCE which decreases in total face value as your mortgage is paid off. is a popular form of decreasing term insurance. -Income riders" attached to a policy y o u a l r e a d y h a v e , wihich provide additional income when a bereaved family is young, are another form. -;0ne long-time insurance agent has challenged this ana- tysis. He argues that this 35-year-old man could buy $50.000 of so-called "permanent insurance" for $724 a year. At the end of 35 years the policy holder would have |27,050 of cash value. Thus he would not only recoup his total Payments of $25,340 but would have what this agent calls a ^profit" of $1,710. ;:How is that possible? Can you. really be protected by insurance all those years and yet recover all your payments and more? -;The answer is that this cal- £ulation does not include the potential interest you lose on Ihe higher premiums you pay for the cash-value insurance. For example, the difference between the cost of decreasing term insurance and cash- Jalue insurance is about $450 «; year. If you deposited that Bifference in a savings account or other fixed-value investment earning even only 5% after taxes, after 30 years you would have a total savings pr$31,392. *_- - * * * I" INSURANCE COMPANIES also usually argue that when a pblicyholder retires he can convert his cash value in that Itind of policy into an annunity paying an income for the rest of;his life. That's a reasonable Argument. It's true that you ·can buy an annuity for a little les by converting cash value than by buying one for cash. You save the sales charge. But the man who bought term insurance and invested the difference could still buy a bigger annuity because he w o u l d h a v e a c c u m u l a t e d more cash. A d m i t t e d l y , there are at least two times when cash- value life insurance might be more suitable: (1) for high- bracket taxpayers, since the earnings of cash-value insurance are sheltered from taxes, and (2) for people who might not be able to save the difference in cost. Even these people might be better off if they at least used the difference in cost to finance other purchases such as cars instead of paying 12 to 22% in finance charges, while earning only 5 to 7% on insurance cash reserves or other fixed value savings. At least if consumers are told the "interest adjusted" cost of cash-value life insurance they would be in better position to judge which kind of insurance is more useful in various situations. A number of consumer spokesmen recently have joined those who for many years urged this kind of f u l l disclosure, and even some of the insurance companies seem ready to give in. Now Sen. Philip A. Hart (D., Mich.) is drafting for in- t r o d u c t i o n in Congress a "truth in life insurance" bill. It would require insurance sellers to disclose the adjusted cost of the insurance if you took into account a reasonable rate of interest the cash value could earn. * * * HART HOPES that this and other requirements of the pending bill will help reduce costs of selling insurance and the lapse rate: He points out that the industry spends almost $5 billion a year in selling and operating expenses to provide about $16 billions of ordinary life insurance death payments, endowments, cash values and policy dividends. Too, millions of dollars are wasted because policy holders terminate their cash value policies early. People who bought cash value policies from four large companies in 1971 lost nearly $25 million when they let those policies lapse within 13 months after purchase. In shopping for insurance you can get some frank guidance from the widely-publicized booklets recently produced by the Pennsylvania State Insurance Department. They include A Shopper's Guide to Term Life Insurance, with comparisons for this kind of policies. These booklets are available at $1 each from Consumer Insurance, 813 National Press Building, Washington, D. C. 20004. The January, February and March 1974 issues of Consumer Reports magazine also have cost listings. The January issue concentrates on five- year term insurance. These back issues should be available at your local library. . ZALES 217 CAPITOL ST. JEWELERS ~ !Our People Make Us Number One We ve had gifts to honor dads for 50 Golden \fears. a. Men's blue Royal Star, 10 karat gold, $65. b. Men's blue Royal Star. 14 karat gold. $135. c. Men's genuine black onyx initial ring, 3 diamonds, 10 karat gold, $89.95. d. Men'?, genuine quartz catseye. 1 diamond, 14 karat gold $115. e. Men's synthetic birthstone ring, !0 karat gold. $45. Zaies Revolving Charge · Zales Custom Charge BankAmericard . Master Charge American Express · Diners Club . Carte Blanche . Layaway ARE YOU PUZZLED FOR A GIFT FOR THE GR AD? COME IN AND SEE HOW E1HBEES FASHION AND ACCESSORY GIFTS FIT PERFECTLY INTO PLACE! I Must rat inns enlarged t Travel Organizer Jovan Musk Oil ding/rani checlfs in red. navy, brown and yellow in the fol- travel companions. Cosmetic Cam' 6.00 ·Jewel Drum 3.00 Double Handle Tote. . 2.50 E\eglass Case . . . . : . 2.50 Purse Kit. . . . . . . :_. 2.50 Cigarette Cane - . ! 2.00 A. is the exciting accent that has stimulated passion since time befian .5. ft JoL-an Musk Oil fur Men in after shai-e a cologne tn amuse his animal instinct*. 5 Danecraft A Whole New Treasure of Beautifully styled in solid sterling silver and gold filled, in a wide variety of styles and new shapes. . . -I. in 15. Beautifully twisted, en/imced and floral patterns. A/i.v or · match them by the arm full. (!old and - siluer. . . Watches by Sheffield Great for giving or receiving. Chouse from a aide and complete variety of styles and colors. A. Digital watch, 22.50 fl. Zodiac watch. 25.00 Aigner Straw Bag Coni-ertible short or shoulder strap handle in a smart and light weight small tote style. . . 16. Hot Weather Halter Beautifully designed and matched four on a chain lockets that really work. . Cold Camisole Top Lace straps and lace trim on bodice in white with blue or pink trim. Sizes Small, Medium, Large. . . Plunge cross-oi-er stvle in a polyester print that rei-erses to a solid color. One size fits all. . . Aigner Small Leather Goods The ultimate in fine craftsmanship in practical leather pieces. So pretty vou will hate to give them away. A. French I'urse. 23.00 H. Folding Wallet 22^00 C. Zipper Key Holder D. Square Pill Box .» 4.50 K. Round fit! Box 4.50 F. Check Book Cover | 1 \ (i. Narrow Perforated Watch Hand 4.00

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