Shirley and Michael Rewega of Palm Desert bought their whole-life insurance from Metropolitan Life. Among the choices they had to make was how often premiums should be paid.

Whole-life policies cost the least if you pay once a year, in a lump sum. If you pay monthly, quarterly or semiannually, the insurance companies add an extra charge.

The Rewegas opted to pay once a month, with the premiums deducted automatically from their bank account.

"Our agent said the extra cost would only be a couple of dollars a month," Shirley Rewega says. She figured they'd net more by keeping their money in the bank for as long as possible.

The Rewegas didn't question the agent's version of the cost. "We had a relationship with him," she says, "so I thought he was giving me the straight scoop."

Guess what? He wasn't.

Paying premiums monthly cost the Rewegas an extra $564 a year, for two $100,000 policies on Michael's life. If they kept that arrangement until Michael reached 70, they'd have paid an extra $8,105. Both the agent and the company profit when customers pay more.

"Is Snoopy a loan shark?" asks actuary Jim Hunt, referring to one of the Charles Schulz cartoon characters who appear in MetLife ads.

Hunt, who consults for the Consumer Federation of America (CFA) in Washington, D.C., says MetLife charges people who make monthly payments at an annual percentage rate of 17 percent.

If you make semiannual payments, MetLife customers pay at an astonishing annual rate of 25 percent or 35 percent a year, Hunt says, depending on when the policy was issued. The CFA calls these interest rates "confiscatory."

Furthermore, these rates aren't disclosed. If you check the policy illustration (something the Rewegas didn't do), you can figure out the extra cost in dollars and cents. But most people can't turn that into monthly compounded rate of interest, Hunt told my associate, Kate O'Brien Ahlers.

It's fair to charge something for letting you make payments monthly. The insurers have administrative expenses, including the agent's commission. They also lose the interest they'd earn if they had all your money upfront.

But monthly payments are generally deducted automatically from your bank account, so the cost shouldn't be very high.

The industry's average annual percentage rate is about 10 percent, Hunt says. Some Prudential and New York Life policies charge almost as much as MetLife, but others carry a lower rate. Hunt has seen a Guardian Life policy at 6.5 percent and USAA Life at less than 5 percent.

MetLife Vice President and actuary Michael Harwood concedes that his company's charges are "slightly higher relative to the industry by this measure alone." But he says MetLife is often more competitive in other policy terms and services, and consumers should consider those, too.

(Also consider that MetLife, in highly publicized legal settlements, was fined for a variety of deceptive sales tactics, designed to generate more sales commissions and profits.)

There are two issues here.

First, most owners of whole-life policies don't realize how large an interest rate they're charged when they make payments at something less than an annual rate. Second, MetLife is charging more than many other insurers do.

If customers knew about these rates, competition would surely bring them down.

What's a customer to do when buying whole-life coverage from MetLife or any other insurer? Here are your choices:

- Pay premiums annually out of earnings or with money you've saved in the bank or a money-market mutual fund. The Rewegas have switched one policy to annual payments, and are in the process of switching the second.

- Pay premiums annually with money borrowed from the policy, if your policy has built up a large enough cash value. Then repay the policy loan in monthly installments over the year. The annual percentage rate will probably be 8 percent or less, Hunt says.

Some insurers will deduct the loan repayments directly from your bank account (but be sure they don't charge extra for it).

Note to people who have forms of insurance other than whole life:

If you have term insurance, it also costs extra to pay premiums monthly. But the amounts are small.

If you have universal life, this issue isn't relevant. You can pay premiums whenever you want. Paying monthly instead of annually means your cash value will build a little more slowly. But there's no interest penalty that profits the agent or the company.

Trading guidelines

In light of last week's wild gyrations in the stock markets, many investors are probably wondering when to sell and when to buy.

In truth, stock investors often make a hash of their sell decisions. I can tell you the implication of the latest research on the subject, but with this warning: It's ugly. Parental guidance may be needed before reading any further.

Unfortunate Truth No. 1: Investors tend to sell their winners rather than letting their profits run. After they sell, they find another stock to buy. Leading to

Unfortunate Truth No. 2: Investors tend to replace their winners with stocks that don't do as well. Some stocks go down, leading to

Unfortunate Truth No. 3: Investors don't sell their lousy stocks. They hold until the price "comes back" or at least starts moving up again. Then they often sell, without waiting to see if the stock might actually make a run. This plays into

Unfortunate Truth No. 4: If you need money, you'll probably sell a winning stock rather than a loser. That cuts off further profits in the winner and deprives you of the tax deduction that selling the losing stock would bring.

The moral of the story is, most long-term investors should buy and hold low-cost mutual funds whose managers also buy and hold rather than trade a lot.

If you like individual stocks, pick companies you believe you can hold for years. And don't read the newspaper every day. Both the news and the investment industry encourage trading, which isn't good for you.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

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