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12-16-2004, 07:32 PM
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#1 |
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Registered User
Join Date: Dec 2004
Posts: 16
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American Amicable Life Insurance (Suckering Soldiers)
Suckering Soldiers: Misrepresenting an expensive life insurance policy as a savvy investment (Money: Jan, 2005). Looking to start a dialog with anyone who has purchased the costly 20-year term life insurance and Horizon Life Fund. These people are taking advantage of our service members.
This "investment", as it's marketed to young soldiers is a 7 year pay, 20 year level term life insurance. For instance, $15,000 of coverage for $50/ mo for the first year, then decreasing to $37.50/mo for the remaining 6 years. It's paid off in year seven, and continues to year 20, at which point the company will refund all the premiums, having not earned any interest for the policy holder. You're then allowed to contribute $50 to the "Horizon Life Fund" which grows at a guaranteed rate of 4%. The company advertises higher rates currently ~6%, and claims it has been as high on 10%. There is a 5% penalty for withdrawing money from the fund in the first 10 years. The problem: this is pitched as a savvy investment to our soldiers. In my humble opinion, I disagree. Your comments please. Last edited by Marine : 03-23-2005 at 11:21 PM. |
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02-22-2005, 11:35 AM
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#2 |
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Registered User
Join Date: Feb 2005
Posts: 1
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Can anyone tell me if anything is being done about american amicable suckering soldiers? My husband and I purchased a simular so called annuity from the company when my husband was stationed at camp lejuene in N.C. in 1998. I fear the company is also setting us up. Our fund, that we are still paying on is called the Wealth Builder fund. And were told at the end of 7 years we don't pay anymore for the life insurance part. And everything will go towards the annuity. And will do that until twenty years. After that we should get all our money back plus the interest it has gained, and can do what ever we want with it. Pay for kids college, pay off home loan whatever we want the money would be ours. Am I wrong? Is this Just a Very expensive life insurance policy?
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03-02-2005, 11:39 PM
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#3 |
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Registered User
Join Date: Mar 2005
Posts: 2
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Actually, I feel that you may be mis-informed if you feel that this plan is not a positive investment. If you have the time, read through this:
http://financialservices.house.gov/...df/090904jd.pdf (Requires Acrobat Reader) It is an explanation of the plan and its full benefits to the house of representatives subcommitte on capital markets. Honeybear, you understand it in full. Myself being a servicemember, I signed up as well for myself and my wife. Marine, take the time to read it, it may change your mind. You can skip over company overview if youd like and just look at the summary of the plan. |
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03-03-2005, 10:28 AM
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#4 |
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Registered User
Join Date: Feb 2004
Location: Mackinaw, IL
Posts: 206
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Get out while you can
This looks like the same scam that was run in the 80's with A L Williams, that was a marketing company that sold insurance thru Mass Indemnity (Atlanta, GA) and tied it to an investment. The concept was "buy term & invest the difference" with the focus on replacement of all kinds of whole life, permanent products, or even term products that looked to be more expensive. Good luck in your decision. Remember, "Let the buyer beware!"
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John M Osterman |
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03-17-2005, 03:17 PM
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#5 |
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Registered User
Join Date: Dec 2004
Posts: 16
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AmdAthlete- The article that you reference is from Mr Dunlap, who is an executive with American Amicable. I seriously doubt that he can be an objective and unbiased source. For the record, I've read his and everybody else's testimony who appeared before congress. I think Elizabeth Jetton's testimony on this topic more accurately reflects the true nature of this plan. The life insurance is totally outrageous for the coverage amount. The big question people don't seem to understand is that you don't need life insurance to save for the future. Go back, and read that sentence again (many times if necessary). The opportunity cost of buying costly insurance vice saving the difference in a conservative mutual fund, or even the bank is tremendous. Simply put, the life insurance is a costly & unneeded distraction. I seriously doubt that the people they (primarily) market this to, E-2 - E-5, most single, need any additional insurance beyond SGLI (yes, this is the target audience on my base; the company can deny it all they want; I have the case files to prove it). In the case one does, then there are MUCH more affordable options (USAA for example, and plenty more). This plan, in my opinion, is a complete distortion of the objective that the company markets: building cash value for that big down payment one day, or whatever. I have studied this extensively, with folks bearing lists of credentials a mile long, and none of them have any interest biasing the discussion, unlike Mr Dunlap.
I will say this: if you choose to do absolutely nothing with respect to financial planning, then the horizon life fund will leave you with more money at the end of the day. But for people who don't feel like paying through the nose for costly and unnecessary life insurance coupled with a savings plan, there are MANY more sensible alternatives that will enrich the service member, and not the insurance company and its shareholders. In an effort to keep this short and to the point, I’ve omitted a lot from the discussion. If you want the nitty gritty numbers, just ask. Last edited by Marine : 04-14-2005 at 02:09 PM. |
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04-20-2005, 12:42 PM
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#6 |
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Registered User
Join Date: Mar 2005
Posts: 2
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While you are paying quite a hefty premium for low-coverage life insurance, the premium is returned after the 20 yr hold. In addition, it is used as a tax shelter, and any interest they made off the premium (up to the current interest earnings rate) is returned to you, tax deferred.
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04-21-2005, 01:28 PM
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#7 |
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Registered User
Join Date: Mar 2005
Posts: 67
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I know little about this plan, but it sure sounds despicable.
They seem to be preying on those with limited knowledge who dont realize they are getting a lousy return on their investment. Term life policies are FAR too cheap these days to even waste time with this sort of plan. For around $40-45 per month (for a male younger than 35 or so....female is probably cheaper) one can buy a million dollar 20 year term policy. |
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04-26-2005, 10:42 PM
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#8 |
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Registered User
Join Date: Dec 2004
Posts: 16
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To my knowledge, the contributions are not sheltered from income tax. The company’s literature, to include the testimony of Mr Dunlap in your earlier reply, makes no mention of tax deferral in this product. In fact, I spoke with a representative from the company who said any interest earned in the HLF is taxed via a 1099, just like ordinary bank interest. (If I’m wrong, please point to a reference so I can correct myself)
I think you also misunderstand the return of premium. Yes, the first 7 years premiums are returned to you at year 20, but earn no interest (certainly not for you). So it's like giving the company a zero interest loan, unless you really think the life insurance was worth it. That's their pitch..."hey, you get the premiums back at the end of 20-years." Yes, but the opportunity cost of that decision is the interest those premiums could have earned you in another investment over 20 years! The sellers would have all of us believe that saving money for the future requires purchasing a high premium, low death benefit, term life insurance policy. Nothing could be further from the truth. The insurance associated with the HLF product is simply a giant commission dressed up like valuable protection. Last edited by Marine : 04-27-2005 at 11:35 PM. |
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04-27-2005, 08:39 PM
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#9 |
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Registered User
Join Date: Nov 2004
Posts: 247
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Marine, you're angry, and that's understandable. But you are making a generalization about life insurance that is a bit off. Life insurance can be used as an investment vehicle. A very effective one at that. Certain types of permanent life insurance can develop a cash value, at a fixed rate or invested in mutual funds. This money isn't growing tax deferred, but tax free. The cost of insurance itself is far more than one would get for the same death benefit in a term policy, but may be well worth it for the tax free growth.
It's fine that you don't think this particular product works for anyone. I just wouldn't make the general statement that "insurance is simply a giant commission dressed up like valuable protection." |
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04-28-2005, 02:04 PM
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#10 |
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Registered User
Join Date: Apr 2005
Location: Flower Mound, TX
Posts: 1
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http://forums.kiplinger.com/newreply.php#
Marine, I retired after 22 years of service to my country. While a young, wet behind the ears squid, I was convinced to purchase a Life Insurance policy, which was at the time, sold to me as the "Wealth Builder" which was supposed to be a savings/retirement plan , guaranteed to produce better than any bank account, and could make me wealthy when I retired. I was convinced to cancel a policy with another company and go with this. I trusted the retired Master Chief who sold me the policy, to look out for this young bucks welfare. Now there is a "Class Action" law suit filed against American Amicable, which ended up becoming Pioneer Security. The law suit charges that American Amicable (a.k.a. Pioneer Security) used recent senior retirees, who had access to bases, to market and sell their "Wealth Builder" package as if it were a security (or mutual fund) type investment, and had not properly filed with the SEC. Unfortunately, the way they sold their product (using recent senior retirees, who had access to bases) is not illegal. Although I know when I was in, I helped draft base policy to prevent this from happening. If you, or anyone you know of, bought a policy from at the time "American Amicable" and later changed to "Pioneer Security" please e-mail me. Randy USN (Ret.) |
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06-02-2005, 07:53 PM
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#11 |
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Registered User
Join Date: Jun 2005
Posts: 1
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I have been paying into the Wealth Builder plan for 9 years.... is it better to cash out and cut my losses or to stick with it now?
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06-08-2005, 12:54 AM
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#12 |
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Registered User
Join Date: Dec 2004
Posts: 16
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What is the Wealth Builder plan? Please describe the policy, rules, amount you've contributed, and the company that issues this.
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06-17-2005, 11:24 AM
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#13 |
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Registered User
Join Date: Jun 2005
Posts: 1
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The truth about this product
For all the disgruntled people who have jumped on the "bash the product" BANDWAGON-
First off, the policy is not a scam. It is approved (not endorsed) for sale in each state it is sold. Everyone who purchases this policy signs a "statement of understanding" I have seen the statement of undertsanding and it clearly spells out everything about policy. So anyone who claims they were "hoodwinked" into purchasing the policy obviously you forgot you signed that you agreed and understood the policy. You are right- the policy does provide a smaller amount of life insurance. You can purchase more coverage for less money out in the market. However this policy is not weighted towards the life insurance alone. The attractive part about this policy is that it has a side account (called the annuity accumulation fund) This side account- pays interest. I checked and currently it pays 6.5% and has a guarantee of 4%. Folks, that means it can never pay less than 4%.....guaranteed! Does your bank offer a 4% return on your savings account. Mine doesn't. There is a 5% withdrawal fee charged on any money withdrawn during the first 10 years. Hmmm....why do you think there is a withdrawal fee? So you keep your money in it. Think about it for a second. The majority of people who keep there money in the bank checking or savings spend it. The "Put and Take" method. You put it in and take it out, never really accumulating very much. Most insurance products have some sort of stipulation, charge etc. This one is no different. Despite what some might believe. Life insurance is an investment. Next point- The policy provides a life insurance benefit coverage for 20 years. If you don't die (which is likely to happen) all the money you paid (premium) The company pays back an amount that is equal to all the premiums you paid for the coverage. They deposit this amount into the "side account" in the 20th policy year. So you are covered for life insurance for 20 years- if you don't die your money is returned. Next point- How are the premiums collected. Remember, it is a 7-pay meaning you pay for the 20 years of coverage in the first 7 years. Example: lets say you select to pay premium amount of $100. Whatever the premium you select. You are allowed to contribute 3x (times) that amount into the policy. Meaning if you select $100 you can put up to $300 into the policy monthly. The first year if you pay $300 a month every month for a full year ($3600 for the year) the company will apply the first $100 towards the cost of the life insurance and the remaining $200 goes into the "side account" earning 6.5% The second year you contribute the same- the company collects 75% of the first $100 to cover the cost of insurance , which is $75 dollars. And the remaining $225 dollars goes into the "side account" It stays that way for years 2 through 7. After year 7 Starting in year 8 All $3600 goes into the "side account" earning 6.5% You are only obligated to pay $100 a month the first year and then $75 a month for years 2 through 7. It is up to you if you want to contribute the extra towards the side account. I don't know why anyone wouldn't contribute the extra...it pays 6.5% (guranteed 4%) Next point- you can pick any amount you want $50 a month $1500 a month doesn't matter. If you picked $50 a month you can put up to $150 a month into the policy. If you picked $1500 a month you can put up to $4500 a month. The charges for the life insurance are the same regardless of the amount. Charges--> 1st year 100% of your premium pays for life insurance. Years 2 through 7 75% of your premium pays for life insurance. Whatever the amount all of that money will come back to you in the 20th policy year (if you didn't die) Next point- Remember, this policy provides a small amount of life insurance. You would never purchase this policy to provide coverage for yourself or your family alone. Obviously, you should purchase additional coverage. Whether it be term or wholelife or both. Next point- The policy used to be called "Wealth Builder" the name was changed to represent the true nature of the product wich is a life insurance product. Now called "Horizon Life" Next point- If you understand the policy you will know how to maximize its benefits. The company is really only concerned with the premiums you pay. In fact, if you don't contribute any extra towards the side account paying 6.5% they don't have to pay out that interest. So what should you do? CONTRIBUTE! Next point- This policy is not just targeted at the military. Civilian population purchases this as well. Next point- The side fun does not grow tax deferred. You will receive a 1099 intrest statement for tax purposes. Next point- the premiums that are returned at the end of the 20th year do not get deposited with interest. They do not earn any interest. The only real cost to you is the amount of money you could have earned on that money had you had it. So if you paid $50 a month for the first year ($600 for the year) and $37.50 a month ($450 a year) for years 2 -7....total premiums paid for 7 years = $3300 So if you are a 20 year old and invested that $3300 at say 6% interest (assuming you can guarantee that you will earn that every year) for 20 years you would have roughly $10,583.43 (That is a gain of $7,283) woopee! IDEJWOOD- if you have been paying into this for 9 years you have already paid up for the life insurance. Any money you are contributing is going directly into the fund paying you interest. Also, in one more year the 5% withdrawal fee disapears. Leaving you a place you can put money in earn better than average interest and take money out anytime without penalty. No bank can do that! Keep it! DON'T LISTEN TO THE PEOPLE WHO DON'T UNDERSTAND INSURANCE AND DON'T UNDERSTAND YOUR POLICY. If you do stop contributing to the policy you have the life insurance which is paid up. If you die- your beneficiary will recieve your death benefit (which is more than the premiums you paid for it) AND YOU WILL GET BACK ALL THE PREMIUMS YOU PAID IN THE FIRST 7 YEARS- DEPOSITED INTO THE FUND IN THE 20TH YEAR. You succeeded! I would bet- those that are upset paid into the policy for 2 years or less, never paid extra to the fund and when they went to get some money- it wasn't there for them (because it paid for the insurance) Then they say they thought it was a savings account or investment or something of the sort. EVEN THOUGH THEY SIGNED A STATEMENT DISCLOSING everything about the policy and how it works. As someone who owns insurance for myself and family I can say that insurance is a valuable thing. Whether or not this policy is right for you depends on your own circumstances. JUST KNOW THIS- from my own due diligence- this policy is not a scam and neither is the company. Just read everything you sign, ask questions, understand what you are getting. Then make it work for you! best of luck! |
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09-25-2005, 12:31 PM
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#14 |
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Registered User
Join Date: Sep 2005
Posts: 1
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 I started my account back in Nov of 2002. Is there anything that I should be worried about? |
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10-04-2005, 10:19 AM
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#15 |
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Registered User
Join Date: Dec 2004
Posts: 16
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Reply to ccagle
ccagle - You should read all the posts from top to bottom if you're concerned to get as much background as possible. My conclusion is there are much better ways to build wealth for down payments and ultimately retirement than wasting money on outrageous life insurance policies that you don't need and simply enrich the agents. My humble opinion: the sooner you get out, the sooner you can start making a sensible investment and really saving for your future. Take a look at Vanguard Funds (or a number of other well managed, low cost funds) and simply compare their expense ratios to what this investment has cost you. I think you'll see the point.
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