Brad Rhodes: Buy guarantees, not promises

In the world of insurance, guarantees matter.

Consider the state of the insurance industry, what is guaranteed anymore? Car insurance premiums are not guaranteed, have a ticket or an accident and see what happens to your future premiums — the same with liability policies, fire insurance and almost any other category of third-party protection.

Insurance companies are happy to offer you protection but only if they can change the rules in the future. The guarantee of insurance continuance is not even guaranteed, become a terrible risk and out you go.

The famous investor, Warren Buffett, put it in perspective when he said this about the insurance business. "How can you beat a business where people send you money, and someday you might have to pay out something?" He couldn't have said it any better; the insurance business is mostly rigged, rigged in favor of the insurance company.

Why does it have to be that way? Why can't an insurance company charge a premium and offer a guarantee?

Would it not make sense for both sides to be honest and fair? Premiums are paid, claims are paid, a win-win situation. The reason that cannot happen is simple if the insurance company is on the hook, they want to be able to wiggle off by changing the number of premiums paid.

One notable example of insurance companies making every attempt to improve their position is the huge mistake made in assumptions used for calculating the actual cost of long-term care insurance. Premiums have increased by almost 900 percent in the past 25 years! Why have premiums escalated? Because the volume of policy owners that have kept their policies and not quit has not met with the assumed projections, the results are far too many claims. So, the insurance companies did the obvious thing; they raised premiums, premiums that have caused enormous difficulties for those who need to keep their protection in place.

I make my livelihood in the insurance business; I offer policies to prospects and care for my clients every day. Why would I associate myself with an industry that is all about rule changing to benefit themselves? Why would I induce anyone to do business with companies who slant the rules for their benefit?

I happen to work in the one segment of the industry that offers the only product that contains guarantees; I sell insurance issued contracts called annuities. These products provide guarantees; insurance companies live up to their guarantees honestly.

Here is an example, a 5-year contract that pays 5 percent interest for each year of the contract. Three years? Longer? Yes, many options are available. Why are annuity companies different than other segments of the industry?

In a simple answer, it is this; the insurance company doesn't want your money, it merely wants to hold your money.

They use your money to make their money, and the benefits offered to you are fully guaranteed. Does an annuity make sense for you? It all depends, it depends on what you need to match up with your goals. If a guaranteed interest rate is essential and a guaranteed lifetime income is necessary, and a guaranteed benefit to your beneficiary is essential, then maybe an annuity will become important to you.

Annuities are not for everyone, but for those who can benefit from the guarantees offered, they might be exactly what you want.

Brad Rhodes lives in Lexington and is a member of Syndicated Columnists.