In 1965, AL Williams died of a heart attack. He had a lifelong policy, but that left the remaining Williams clan underinsured. This impressed his son, Art L. Williams, Jr, whose nephew later introduced him to the concept of term life insurance, which was relatively unknown at the time and yielded much more in face value at lower rates.
Fueled by the financial hardship endured by his family, Art launched himself into an ambassadorship of long-term life with almost religious fervor. He coined the phrase “Buy term and invest the difference”, BTID for short, launched a new company based on the concept, had some 200,000 agents under his umbrella and the rest is history.
Or is it?
Some 40 years later, a study published in the May 2015 Journal of Financial Service Professionals indicates that Williams’ grand experiment had unintended consequences for families. “People don’t buy a term and don’t invest the difference,” said David F. Babbel, co-author of the study. “They most likely rent the term, expire it, and spend the difference,” leaving many families uninsured rather than simply underinsured when a loved one passes away.
Even the small percentage of people who fully follow Art’s advice and invest the difference can emotionally invest in the market by buying high and selling low, or buying managed investments without realizing the potential impact of associated fees on their nest egg . People who think they are playing it safe by overfunding $401,000 above what an employer adjusts often don’t think that if the management fee is 3%, they need to make a 3% return each year to break even. and protect their business. principle.
Supposing everyone who bought a term invested the difference wisely, all of life still offers benefits that BTID doesn’t. Whole life is insurable, allowing the insured to purchase additional coverage with the accumulated cash value, even if their health has declined to the point where they can no longer purchase new policies. Furthermore, they can borrow against cash value, convert it into guaranteed income or make tax-free distributions.
Pointing out the value of BTID to investment firms, Chris Blunt, executive vice president of New York Life, says, “Generations of Wall Street professionals have been trained by their firms to throw away cash value life insurance policies so that the investment firms can use those dollars below the could keep a line. management.” He also points out that there is no need to choose between term and permanent life insurance policies. Young families can buy both and convert the term to a lifetime as their income rises.
Art Williams’ legacy consists of overpriced forward options and a drastically reduced pool of agents who, like the Wall Streeters Mr. Blunt calls, push only one product and openly belittle every other option available to their prospects, selling cash value insurance calling it “waste value” and a “terrible product” and touting BTID as the only solution for all. The 40-year retrospective of this way of life insurance described in this study does not support these claims. America’s families earn more in terms of both options and advice.