Q. Twenty years ago a life insurance salesman convinced me to cash out a policy and buy another policy in the amount of $25,000. The advantage was that my premium would be about 4 times greater ($98), but it would build up enough value that I could stop paying the premium after a number of years. I would be covered for life. I was making a good salary, so it went fine. Eventually, the agent told me I could stop paying the premium.

Another company purchased the first insurance company and was hit with a class action suit on these policies. They worked out an agreement with the court. It didn't affect me at the time. Then, about three years ago, the company began forcing me to pay $926.25 a year in premium. Now I am 78 and retired, and the premium hits me pretty hard. The cost of the insurance is probably figured at my present age. I wonder how many retirees have been hit with this at a time when they can ill afford to pay the high premium. It seems like I am bailing them out of poor work by their actuaries. Is there anything I can do?

---J.L., by email from Nashville, TN



A. If I wanted to risk a suspicious accidental death, I could make a career out of "insurance purchases gone bad" stories from readers. Your letter is one of the reasons readers see so little affection for insurance based products in this column. I've seen them since I started writing this column in 1977. Nothing has changed.

The problem isn't poor actuary work. The problem was caused by a long-term decline in interest rates that an aggressive sales force was ill-inclined to talk about because it might have undone a sale. The class-action suits followed because lots of people ran into the problem you now have, but earlier.

Life insurance is a great idea. It allows us to help those we love maintain their standard of living even if we are no longer there to provide the earning power. The question you need to ask is simple: Do you still need life insurance at age 78?

You're retired. Your income comes from Social Security, your savings, and maybe a pension. Your survivors' future standard of living may not be at risk if you die. They may miss your affection, your wisdom, and your weird jokes, but they probably won't miss your earning power because it has already been replaced.

So think about dropping the policy. If you don't need the insurance, the premium has become an expensive lottery ticket. It will eventually pay off, but you might make better use of the money while you are alive.



Q. I recently attended an investment meeting in Dallas where the speaker said Iran is considering pricing its oil in euros rather than dollars. I have seen nothing in the general media about this. So I did a little online research and apparently this is for real but has not yet happened. If this happens, what are the long-term consequences for the dollar and for us? Would it mean significant and rapid devaluation of the dollar and our standard of living?

---T.A., by email from Dallas



A. Last September Iran announced it would open an exchange for the trade of oil that would compete with institutions like the New York Mercantile Exchange and the ICE Futures Exchange in London. It also intended to price oil in euros rather than dollars. This makes some sense because much of Iran's oil trade is with Europe. Others, with some justification, see it as a plot against the supremacy of the dollar. The new exchange was supposed to open in March but has been delayed.

The first thing to observe is that this kind of fear isn't new. In the late '70s the Saudis threatened to diversify away from dollars and talked about pricing oil in a basket of currencies. More recently we have had waves of worry about concentrations of dollars as foreign exchange in China, dependence on foreign purchases of U.S. Treasury obligations, etc.

We've got a lot to worry about. By being able to print an unlimited supply of dollars and use them to buy goods and services from around the world, we have been able, in effect, to tax the entire world and maintain a higher standard of living than we might have otherwise. If we were to lose this position, the value of our currency would decline and we would repatriate the inflation we have been exporting. It would have a significant impact on our standard of living.

Will it happen?

It will happen when there is a better deal than the dollar. There wasn't a better deal when the Saudis wanted to diversify a quarter-century ago. And there isn't a better deal today because most countries are either too small or in too much financial trouble themselves to provide a replacement for the dollar. In the paper money beauty contest, the dollar still wins because it is the least ugly.