Tuesday, February 8, 1977
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agency a note at 8 percent annual interest over a five-year
term.
The student pays regular premiums starting the second
year. If he pays regularly for the next four years, he gets
a fifth-year anniversary payment that partly repays
the note.
But if the student runs short of money and misses
a payment, the note, plus interest, comes due immediately.
Severin said about half the CollegeMaster policy
holders choose the note option.
Severin-If we don't
do it right, we won't be
here "
But critics say students don't understand the note.
"You don't have to pay with a note," Severin said. He
said agents explain the payment system to students "as
many times as possible."
"It's the same thing any department store or bank
offers," said Severin.
A student can also take out term insurance that's less
expensive. It's like a rent payment-no money is returned
when it expires.
Protection is personal
Severin said everyone needs some kind of insurance.
To meet different needs his firm represents other
companies like Hartford Life and National Home life
Health.
Agents are trained
"The most important thing you have to do is choose
an agent," Severin said.
Agents must first pass the state insurance exam. Fi
delity Union agents have one week of required training in
the home office in Dallas. The agent then spends four
weeks to six months in training at th; local agency,
Severin said. After a full year in the business the agent
may take two years of basic insurance training from the
life Underwriter Training Council.
The next step is becoming a Charter Life Underwriter.
It takes five yean and passing grades on 1 0 tests.
Severin said the CLU designation is "a very good
measure of an agent's ability. Neither he nor his six
agents are CUT.
How they get business
Severin said clients come to the agency primarily on a
referral basis.
But he said agents have sideline activities which include
"developing a rapport (with students) by giving lectures a
fraternities and sororities." He said the lectures areic
sales pitches, but a student at a lecture might remember
Fidelity Union when looking for insurance.
"There really aren't too many major differences be
tween companies or programs" because companies "are all
tightly controlled by federal and state laws.
"I don't think we can say we're that much better than
anybody else."
Insurance profs
sicfvis stu cl 9 n ti
By .K. Casaccio
If you're confused by insurance company appeals to
"buy now while you're young," you should:
Know that most students don't need insurance;
Be wary of offers to finance the first year premium
payment with a loan ;
-Beware of fast-talking agents.
Do you need it?
Leonard Berekson, UNL associate professor of finance
and insurance, said:
"Insurance should be sold for needs. The average
unmarried college student doesn't really need insurance."
Maybeyes...
Fidelity Union Life Insurance, the leader in college stu
dent life insurance slaes at UNL, says in its pamphlet,
. . .the younger you are when you begin your life
insurance program, the less expensive it's going to be."
But Barry Schweig, UNL visiting assistant professor of
finance and insurance, said:
"According to that statement, your parents should buy
you life insurance when you're bom."
Schweig said most college graduates will be covered
anyway by future employers as a fringe benefit.
Benefits of term
Schweig and Berekson recommend inexpensive con
vertible term insurance instead of whole -life insurance.
: ,(.:-
Berekson: "Insurance
should be sold for needs."
For about $2 a month, term insurance will cover the stu
dent in case of death, and help his family pay Ms debts.
We (Schweig and Berekson) are in favor of life insur
ance," Schweig said. "What we are against is Cadillac life
insurance for students on a. Volkswagen budget."
Berekson said he doesn't object to "Fidelity Union
se, as much as how they sell the stuff."
Fidelity Union lets students buy insurance by lending
them the first year's premium, at 8 annual interest over
five years. If the borrower decides to cancel the insurance,
the loan becomes due for payment at once.
Fidelity Union presents the loan as a deferred payment
plan which gives the student the impression the first year
only costs $10, said Joseph Belth, professor of insurance
at Indiana University. Actually, the student pays the full
amount, he said.
'He's paying the first year on borrowed money," said
Belth.
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Schweig-"What we're
against is Cadillac insur
ance for students on a
Volkswagen budget."
"I have yet to see a student who knew what he got
into."
Schweig calls premium loans "a clever marketing
scheme that may not be in the best instrest of the college
student. If you had to pay for it immediately you might
be more wary."
Something for nothing
Berekson said Fidelity Union marketing makes people
think they're getting insurance for nothing. He warns
students in his insurance classes against getting trapped by
premium loan financing. Once they are trapped, it's either
pay this year's premium and stay with the company, or
pay the first year's premium plus interest and get out.
Trapped
And the chances are good the student will want out.
More people cancel Fidelity Union policies than most
other insurance companies, according to Forbes business
magazine.
Mark Dorfman, associate professor of finance at Miami
University of Ohio, objects to Fidelity Union's sales pitch.
Dorfman says the agents will say something like "show
me you're a man by signing on the dotted line."
Or they appeal to a student's sense of independence by
saying, "you don't have to ask your parents, you're an
adult."
It is more than insulting when Forbes magazine
reports:
"A full 25 per cent of (Fidelity Union) agents are
women, and they are taught to hit first on women's pride,
then on fear: 1) a liberated woman needs a policy to re
place the financial security that marriage once provided,
and 2) 90 per cent of all women over 65 are broke, the
company chums.
Meanwhile, insurance professors warn the student
know what you're getting into.