Life insurance is one of the least understood financial products in the world. In just a few minutes of study, one can reasonably grasp the concept of equity interests in a business (e.g., common stock, preferred stock), bonds and other forms of debt. Even more complicated financial products, such as derivatives and options can be readily understood.
However, even some people who have spent a career in the life insurance industry do not really understand the financial aspects of this product. Indeed, after finishing a lecture on how life insurance “works,” a 30 year life insurance agent came up to me and said, “Until today, I never really understood what I’ve been selling.” Once, when I asked another very successful CLU how many of his clients really understood what they were buying, he said, “virtually zero.”