Northwest Arkansas Times from Fayetteville, Arkansas on May 31, 1974 · Page 34
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May 31, 1974

Northwest Arkansas Times from Fayetteville, Arkansas · Page 34

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Fayetteville, Arkansas
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Friday, May 31, 1974
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Page 34
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For Life Insurance Agents Professionalism. Stressed By REX ALAN SKTtE la the itory of Aladdin, as you may remember, it is told how a dervish came to Aladdin '» hous* offering to trade new lamps for old. And how Aladdin's wife, thinking this was a good deal indeed, took . him up on it. Unfortunately it was a good deal only for the dervish himself, and the Aladdin family wound up the loser. Years ago there were some life insurance agents who also offered "new tamps for old," seeking to persuade people to replace existing life insurance policies with new ones. And these t r a d e s , too, were profitable to the agent and costly to the policyhoWers who made the switch. However, that waa a tang time ago. Since then, the life insurance business has come a l o n g way toward true professionalism. Agents are far better educated and trained In ; their field. Ethical standards ' have been vastly improved. Moreover, the insurance-buying ; public has become far better informed. As a result of all this, the replacing of old policies by new ones doesn't happen very much anymore. Even so ; there's still just enough of it that buyers need to occasionally ' be warned of the probable costliness of such a swap. Actually, conditioned as we are to rapid product changes and the "new and improved"' models of just about everything it's a wonder t h a t insurance policy replacement happens as seldom as it does. After all · ' w e are reminded nightly that whereas the old New Improved Whammo merely soaked rings out of collars, the New 1m . proved Whammo blasts Uiem out with thousands of tiny dyna · mite pills. DAZZLE And we are shown in pictures how the Dazzle that used to merely make teeth "40 per cen whiter" now, in its "new and Improved' form, also provide! the user with an instant hairdi and suntan. As well, true technical advances are oc eurring so fast that oftei yesterday's miracle really , today's junk. Therefore, it's no unreasonable for one to wonde if the same thing may be tru of life insurance, and if oh policies should be periodically replaced with new ones. And by using oversimplified figures and half-facts...."Now i you cash this policy in an invest the cash values at, say t per cent Interest, and alsc b u y this new improvec model...." one can "prove - replacement to be a good idea ! In the same way, it's easy t · "prove" the world is flat jus .- because it looks flat, wherea ' proving it to be round, as actually !s, is more com ; plicated. The same thing is true in comparison of old and ni Insurance policies. It takes lot of complicated mathematic to make a complete and prope analysis. But when it is done the result is almost invariab t h e same -- that th poiicyholder nearly alwa; loses When he trades in permanent (cash value) li insurance policy and replace It with another model. However, even though to th person doing it the calculatio seems to involve almost a much math as a space sho the reasons for the result . simple and based in soli common sense. One involvi le cost factors of life insurance nd the other is rooted in what called the "acquisition cost" a policy. TRUE COST The true cost of life insurance determined by only three ings. (1) The rate at which people die. (2) The company'! :te of return on invested policy e s e r v e *. (3) Company perating expenses. No matter hat we name a policy, or how e slice it up, rearrange it, r package it, these things still ontrol its cost. And no company that I know of has ever und a way to keep its poltcy- olders from dying at the ormal rate. Nor (especially considering le strict laws governing life n s u r a n c e company i n - estmenls) does any company ossess a golden secret which ssures it of making a signifi- mtly better investment return han the others. And the fierce competition among the 1,800 or o companies -- each trying to "fer a little better deal than ic others -- provides a mosl 'fectiye control over company aerating costs. Therefore, aken together, these things tel that no one company can arovide the buyer with pectacular b a r g a i n not enerally available from other ompanies. "However," you, might ask can't policies become obsolete Kcause they are based on out f-date mortality and invest .ent assumptions?" And that's very logical question iowever, here again we have ome built-in controls. One lat mutual companies (ownec olely by their policyholders" re required by law. to return Imost all their operating gain' o the policyholders in the form f dividends, thus providinj usurance at very close to it. 'eal cost, adjusted to curren rue death and investmen To be c o m p e t i t i v e itockholdcr - owned companiei must offer values comparabl lo the mutuals. If they didn't hey'd soon be out of business The fact that most of them are Crowing and prospering is evi dence that they do indeed offer :ompetitive values. NOTHING GAINED But all this tells us so fa s that there is nothing to b gained from switching from a ild to a new policy. But wh; s there a loss? This come r o m double "acquisitio costs." It's expensive for company to write a new policy much so that one has t be on the books for five or mor years, depending on the com jany, to just break even. No only are there agents' com missions, but also medical fee cost of policy printing, actuaria ·services, secretarial work underwriting, mailing, etc. And because the compan doesn't know how long th policy will be in in force, thes costs are charged against th first premiums you pay. costs are the reason a polic builds little cash value in early years. Otherwise, its cas values would be nearly equ; to total premiums paid rigl from the very beginning. Now then, if you abandon policy on which these cos have already been charged o and replace it with a new on you will simply wind up payin double costs for a single se vice. And that can be e pensive. Particularly when yi consider that if you think yoi present policy no longer fi your needs you can usually g i jiressea ur present company to adjust present you with a compre- t at no extra expense at all. Therefore, it becomes clear tat since no company has MM power to change the factors hat determine the cost of life insurance, and thus has no way of creating new gains to offset e new costs incurred, it is inly rarely that a situation arises in which policy replacement can be economically ustified when all the facts are town PROOF REQUIRED This is why a great many companies won't allow their agents to replace existing termanent insurance of their own or any other company ithout first providing a mass proof that this is. in fact, to the policyholder's advantage. It is why Arkansas law requires an agent involved in ich a switch (even if it was 1 your idea and not his) to i e n s i v e signed statement ·evealing all the ramifications )( the changeover, including the iisad vantages. And it is why. f you should be considerini tuch a switch, you should tint jontact your present company a see if it cantt make .the fesired adjustments without subjecting you to a new set d acquisition costs. Then, if you're still riot sure, ask the office of the Arkansas Insurance Commissioner for an opinion before you take the inal step. Just remember that your life nsurance really is a sort o Aladdin's lamp. One that will nstantly create an estate at the ;ime it is needed most. And, as in the case of Aladdin's wife, you should be very sure the new lamp is actually as goot as the old before you make any trades. NWARPC Moves Ahead (CONTINUED FROM PAGE IB) cultural land as a private open space resource. Open space objectives are to r e s e r v e open space for ecological balance and preser- v a t i o n o f unique natural esources, to preserve sufficient ands to meet future open space requirements, and to balance active and passive open space areas in accord with natural suitability while developing a variety of open space and recreational facilities. The Commission's adoption of le Northwest Arkansas Water luality Management Plan came le first of this month, after an April, public hearing. In the lan drawn up by Dr. Dee Wilchell, University of Aransas civil engineer, for the NWARPC, two recommen- ations were made for wastewater treatment. The two recommended plans were selected after Mitchell and associate engineers studied m o r e than a hundred possibilities. The selected plans were noted to be the most cost- effective proposals known to date. In the resolution to Approve he plan as the basic criteria or water quality management n N o r t h w e s t Arkansas NWARPC members asked the Environmental P r o t e c t i o n Agency to reevaluate some of he stringent effluent standards icing imposed on the region. The top recommended pro gram in the Water Quality Management Plan designates hat two regional wastewater reatment plants be located on .he Illinois River near Savoj and at Siloam Springs. The :ransition from the presently operating municipal plants to the regional system would be a gradual one, with plant phased out as each city ex ceeded its plant's capacity. In the recommended plan Siloam Springs would hook up to Beaver Reservoir for it water supply. Treatment a wastewater plants would be secondary, a less costly ap proach than tertiary (thre stage) treatment. But to implement this pla with its $24.5 million price ta for capital and operating e: penses through 1990, the EPA would have to reclassify a seg ment of the Illinois River down stream from where the tw plants would be located. The reclassification wou! consist of lowering the requirec issolved oxygen minimum rom six parts oxygen per mil- on parts to five p a r t s xygen per million water. Mit- lell has said reepatedly Wiat his change would not negative- y affect the river's water qual- y or native life. This plan is meeting opposition from property owners along he Illinois River who h a v e landed together into a non-pro(- t corporation to f i g h t the eclassification that they feel will degrade and pollute the iver. Although adopted by the NWARPC for this region, the Water Quality Management Plan has not yet been officially ecognized by the Arkansas Department of Pollution Control and Ecology and the EPA. The alternative to the first Ian presented in Mitchell's 'eport would divide Washington, Benton, and the western part of Madison Counties into four districts, three of which would contain five multiple-city wastewater treatment plants. Four individual city plants would be used in this plan. The alternative plan carries a $55.5 million price tag for capital and operating expenses through 1990. In both plans outlined M i t c h e l l ' s report, t h e g e o g r a p h i c al isolation o Sureka Springs and Huntsville would necessitate these cities laving their own treatmen ilants. The report pointed out that a regional approach to wastewater treatment will be less costly than an individual m u n i c i p a l approach. T 'ederal government would pay 75 per cent of the construction costs for treatment plants but none of the operating cos Mitchell n o t e d at the public hearing on the plan. Projects the NWARPC will be working on this coming year include serving as a coordinator in the continuing regional transportation study, the regional airport study, a septic tank and soils study and a wasteload allocation study. NWARPC staff members will continue to monitor housing activity in Benton and Washington Counties and review local governments' applications for federal aid. Composed of 23 local units of government a year ago, the c o m m i s s i o n accepted the municipality of Garfieid into its membership late last year. koirtw Opm Two highway postil contract routes an now open Tor bids, iceordinf to Herman Tuck, Fayetteville postmaster. One is the FiyettevlUe to Kingston rouU and UM Mcond is Uie FayetUville - Evansville run. Information and bid packages may be obtained by con- tactinf Tuck. DetdUne lor bids on the routn is June 9. NwMmm* ArteMM IIMH, May, May »l, »»74 0 17ft NEWS WHILE IT IS NEWS IN THE TIMES interest on a Regular Passbook Account with no minimum * *· o; "· · " - i T ,i v §t Fayetteville iSd Loan Association. (W«;'on''a 90-Day Certificate of Deposit with no Year Certificate of Deposit with a minimum Certificate of Deposit w*h a Certificate of Deposit wan a minimum tfMttiofe^ ..--, , " -*! "? ' , '. maknti.tyt';- 1 , v "' iff*^Vi-i'.·:· · · · ; ( - -" .- SAVINGS AND LOAN kTMN 20! HCflTH EAST AVENUE, ·^^^T^^KMsf,· \ "'·' ··/ "'r-"'/-. *·:£ ""· J*Jf **;;. * · ' "is.'*-'." , ', : · . · . , ' BE STINGY! FLY SKYWAYS TO LITTLE ROCK AND TULSA SERVICE TO LITTLE ROCK 7 a.m. -- 8:55 o.m. -- 12:15 p.m. -- 2:45 p.m. -- 4:30 p.m. RETURN FLIGHTS 8 a.m. -- 10 o.m. -- 1:35 p.m. -- 335 p.m. -- 5:30 p.m. FLIGHTS TO TUUA 7:00 a.m. -- 2:30 p.m. --5:30 p.m. SERVICE FROM TULSA 8:00 a.m. -- 3:30 p.m. -- 8:05 p.m. ONE WAY LITTLE ROCK FARE $24; ROUND TRIP $42 ONE WAY TULSA FARE $18 ROUND TRIP $33 SPECIAL WEEKEND SCHEDULES FOR RESERVATIONS CALL 442-6281 or Dial Toll Free 1-800-332-9098 from any Ark. City Skyways^ WE'RE STILL HERE! Established and growing after sixteen years of service, The Standard Register Co. remains an energetic example of progress. AND PLEASED TO HAVE HAD A PART IN THE CONTINUED GROWTH OF NORTHWEST ARKANSAS. The Standard Register Co. Foy*ttovill«, Arkansas

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