I remember a debate a while back about insurance agents and fiduciary responsibility. Fiduciary responsibility means that someone can be held liable for enrolling a client in a product, knowing that a better product is available. To my knowledge, insurance agents don’t have a fiduciary responsibility to the policy owner unless they are selling products that require a securities license (variable products).
In my opinion, insurance agents need fiduciary responsibility with graded whole life. Currently, insurance agents are required to disclose the limitations of graded whole life, but they do not have fiduciary responsibility per se. I can understand certain underwriting situations where an agent doesn’t know of a better offer because very few insurance companies would make a better offer. I am talking about the obvious situations where nearly all companies would offer something better. I think insurance agents should be held responsible in those situations.
When high risk clients come to the realization that graded whole life is the only option, I often hear them say, “Well, I wasn’t planning to die in two years anyway.” I think they say that to make themselves feel better, but the reality is that many people do pass away in the first two years of a policy.
Insurance agents are the last line of defense against inferior products. Even in a situation where you think graded whole life is the only option, an agent might be able to surprise you with something better. You should never buy graded whole life without consulting an agent. When your goal is to fund a cremation or burial, simplified issue whole life should be the product to reach for.