In his job at the National Institutes of Health, Dr. James A. Magner is analyzing the molecular structure of a hormone that stimulates the thyroid gland. One evening at home, he was trying to figure out the life insurance policy he purchased two years ago.

Glancing at the rows of figures, Magner said, he couldn't understand precisely what the coverage was or what benefits the policy gave him, nor could he recall how much he was supposed to pay each year.

"I try to be an intelligent consumer," he said in the family room of his Wheaton home. "It was inscrutable." Before deciding which coverage to buy, Magner said, he had asked a second agent for prices on an equivalent $100,000 policy. But when he got back a complicated set of numbers, he recalled, "I couldn't compare."

Like half the people who purchase life insurance in this country, Magner ended up buying a policy from someone he knew--in this case, his sister-in-law, an agent with Equitable Life Assurance Society of the U.S. He said he still doesn't know if he got the best buy.

The NIH physician is not alone. Even insurance company executives and other experts say there are so many variables in prices, benefits and types of policies offered by life insurance companies that they cannot compare them accurately without a computer analysis.

"I've been around it life insurance all my life, and I still can't understand it. I, as a professional regulator, cannot make a comparison," said James R. Montgomery III, the District's acting superintendent of insurance for the past four years.

Nearly 150 million people, or two out of three Americans, are covered by life insurance, according to industry figures. Second in total wealth only to the banking industry, the nation's 1,900 life insurance companies collect $47 billion in payments each year.

A study by The Washington Post of the way life insurance is sold shows:

The policy included in eight out of 10 purchases--the so-called whole life policy that guarantees a lump-sum cash payment upon death, or a cash payment if the policy is turned in before death--offers a low return to the consumer.

In general, the purchase of straight insurance coverage, called term insurance, guarantees the same payment upon death at a much lower initial cost and allows the consumer to earn a greater cash return by placing the amount saved in a money fund or similar investment. Universal life policies, which are whole life policies with flexible payments and cash values based on current market rates, do not necessarily offer better returns than traditional whole life policies.

For equivalent coverage and insurance benefits, one whole life policy sometimes can be twice as expensive as another, as shown by a Post comparison of rates compiled from 10 large life insurance companies by Computone Systems Inc., an Atlanta-based computer service for the industry. The cost of term insurance from these companies can vary over time by as much as two-thirds.

Based on extensive interviews with 15 agents from the five largest insurance companies, agents frequently do not have full information about comparative costs and benefits. Yet, according to an industry survey, nearly nine in 10 consumers who buy insurance accept the recommendations of their agents. Often respected and visible members of their communities, agents offer personal service and attention, which many say is at least as important as cost.

Agents, who are paid commissions, frequently have a substantial financial incentive to sell whole life insurance. According to a representative for Metropolitan Life Insurance Co., for example, a Metropolitan agent would earn a first-year commission of $652 for selling a $100,000 whole life policy, compared with $39 for selling a term policy providing the same coverage. Because whole life payments are higher than term payments for the same coverage, all agents paid on commission receive more remuneration for selling whole life.

Without the benefit of full cost comparisons, consumers can mistakenly conclude that whole life is less expensive than term insurance.

Most of the agents interviewed compared the cost of whole life and term policies without taking into account the money that consumers could earn by buying the less expensive term insurance and investing the difference in payments between the two types of policies.

The insurance regulations of 36 states, including Maryland, require agents to make this type of disclosure when comparing policies for consumers. Over a period of years, the difference in payments could cost a consumer tens of thousands of dollars.

State insurance laws prohibit misrepresentations, but are rarely enforced. Some state insurance commissioners said they have neither the money nor the manpower to police the nation's 250,000 life insurance agents, nor the political muscle to require adequate disclosure of costs. Others said they receive few consumer complaints about life insurance.

"The misrepresentations that go on in this business would bring license suspensions or revocations if they were selling stock instead of life insurance," said Donald G. Malik, a San Francisco-area life insurance agent and securities salesman. "In the insurance industry, the agent laughs all the way to the bank."

"Half the agents don't know what the truth is," said William E. Moulton Jr., an agent in Portsmouth, Va.

On the surface, whole life insurance sounds attractive. It guarantees a cash payment when the policyholder dies, or, if he turns it in, pays a cash benefit that increases each year the policy is held. The annual payments remain the same as the policyholder grows older.

Robert A. Beck, chairman and chief executive officer of Prudential Insurance Co. of America, the largest insurance company in the world, makes the traditional argument for whole life: that it guarantees a death benefit in old age and, in effect, forces people to save.

"Theoretically, you can make the argument that you can invest, but almost no one invests the difference, so you don't end up with the savings," Beck said, referring to the purchase of less expensive term insurance and investment of the difference between annual payments.

The cost of term insurance continues to increase until it becomes prohibitively expensive in old age. Yet, once people retire and their children are grown, they generally do not need life insurance to protect against loss of income. They do need it--and need a lot of it--when their children are young and dependent on them for support. According to the Life Insurance Marketing and Research Association, most whole life policies are turned in for cash before age 65.

"My advice is to buy term and buy more term," said William A. White, who, as chief actuary of the New Jersey State Insurance Department, is responsible for verifying the statistical claims of insurance companies. "The damage done by the whole life people is, policyholders get a less attractive investment program at the same time they get less insurance than they should get . . . . The problem is, the agent sells whole life and doesn't sell term insurance to meet the customer's needs," White said.

Robert W. MacDonald, president and chief executive officer of ITT Life Insurance Corp., said his company stopped selling whole life a year ago. "The other companies are so committed to selling the product that they've had for 100 years because it gives them higher profits, and they have a tremendous investment in the agents who sell it," MacDonald said.

For an initial annual payment of $155, a 32-year-old male can buy $100,000 in term insurance coverage from Metropolitan Life Insurance Co., according to the Computone figures. The same payment buys only $8,055 in whole life coverage from Metropolitan.

The cost of term insurance changes each year, gradually rising with age. But if the annual difference in cost for the same $100,000 in coverage between Metropolitan's term and whole life insurance policies, as shown in the Computone figures, were invested each year at 8 percent in annually compounded interest, the 32-year-old policyholder with term insurance could have accumulated $79,327 in a side fund by the age of 65. In the event of his death, his beneficiary would receive both the $100,000 death benefit and the $79,327 from the side fund--a total of $179,327.

With whole life, his beneficiary would receive the $100,000 death benefit only. If he lived until 65 and cashed in the policy, the Computone figures show he would receive $53,100. The income from the side fund and a portion of the whole life cash value each could incur income taxes, so the results may vary based on the tax bracket of the individual, the type of investment chosen and the return earned.

By investing the extra money themselves, life insurance companies are able to add to their own assets, which now stand at $584 billion. At the same time, inflation cuts into the value of the coverage purchased. By age 65, a $100,000 policy purchased at age 32 is worth $14,620, assuming an inflation rate of 6 percent a year.

The cost of term insurance can vary as well. The first-year payments on term policies of the 10 companies compared vary from $128 to $235 for the same $100,000 in coverage. Of those policies, the best term insurance buys in the early years are from Equitable, Metropolitan, and New York Life Insurance Co.

This reporter visited the Washington-area offices of the five largest life insurance companies and asked 15 agents to give their sales presentations. Identifying himself as a Washington Post reporter doing a story on life insurance, he explained that he has a $120,000 mortgage and relatively little life insurance protection that would enable his wife to meet the payments if he died.

Thirteen of the 15 agents made statements that could be considered to be misleading. Three of the six agents whose companies pay a higher percentage commission for selling whole life insurance said they get the same commission for selling whole life and term policies.

Six of the agents claimed his or her company had the cheapest rates, when it did not; six said rates of all companies are about the same. Depending on which type of company they represented, four said that mutual companies, which are similar to non-profit institutions, or stock companies, which are owned by stockholders, are always cheapest.

All 15 agents recommended whole life insurance, and five recommended term insurance in addition. They suggested buying total coverage ranging from $60,000 to $165,000.

Thirteen of the agents claimed whole life is cheaper than term, failing to take into account the money the consumer could make by investing the money saved by buying term insurance--a factor known as the time value of money. Several suggested that because whole life dividends and cash-in values eventually exceed the annual payments for the policies, whole life is actually free or returns a profit.

The Maryland insurance regulations state, "A system or presentation which does not recognize the time value of money through the use of appropriate interest adjustments may not be used for comparing the cost of two or more life insurance policies." Such a presentation can be made under the regulations if accompanied by a statement that the time value of money is not being taken into account.

The penalty for violation of the regulations is suspension or revocation of an agent's license or a fine of up to $500 for each offense. Since it took effect in 1980, the regulation has not been enforced. The District and Virginia do not have such a rule.

This reporter bought a $60,000 term policy, later increasing it to $110,000.

Here is what some agents recommended:

The receptionist at the Washington office of Prudential Insurance Co. of America directed the reporter to William Sky, who has been an agent with Prudential for 18 years. Prudential has assets of $77 billion.

Referring to some of the baffling variables that make life insurance prices difficult to compare, Sky recommended that the reporter obtain a $20,000 whole life policy plus a special $50,000 term policy. He said the total cost in the first year would be $700.

The term policy he recommended is known as decreasing term insurance, which, like whole life, has a costly initial payment that never increases, but ends up being more expensive than standard term insurance if the time value of money is taken into account.

Asked if he gets a higher commission for selling whole life instead of standard term insurance, Sky said, "The commission is the same for term and whole life."

The commission is the same for decreasing term insurance and whole life. But, according to the Prudential commission schedule, Sky would have received 35 percent of the much smaller first-year payment for selling straight term insurance, compared with 50 percent of the far larger whole life and decreasing term first-year payments.

Asked later why he had said his commissions were identical, Sky said, "There is no great difference between 35 percent for term insurance and 50 percent on whole life."

Sky said the rates of all mutual companies like Prudential are "about the same." Yet, in one example based on Computone figures, New England Mutual Life Insurance Co.'s whole life policy for $100,000 in coverage after 38 years yields 27 percent more than Prudential's.

When these and other differences were mentioned to Sky, he said, "To be quite honest, I haven't done a lot of this kind of comparison."

He said that if a customer asked him to compare prices, he would compare the basic annual payments charged rather than use index figures that take account of the time value of money. Thirty-six states require agents to disclose the index figures--but only after the policy is sold. Consumers then have 10 days to change their minds and get a refund. Although the District and Virginia do not have that requirement, Prudential said it follows the rule in every state.

"You can show an interest-adjusted cost, but the customer can't relate to it," Sky said. "I think I've been asked about the index figures twice in 18 years."

A Prudential brochure distributed to agents was lying on a table in the waiting room of the Bethesda office. A chart in the brochure showed that the total payments for a new Prudential whole life policy are well below those for term insurance--$50,447 for term coverage for a 25-year-old male who keeps his policy to age 70, compared with $19,977 for the whole life policy.

If the chart had taken into account the time value of money, the annual yield of the term policy would have been about the same as the whole life policy if the policyholder died before age 69, when the term policy ends.

A footnote saying that the time value of money had not been taken into account appeared on another chart on a different page.

Shripad N. Pai is sales manager of the Kensington office of Metropolitan Life Insurance Co. A member of the Million Dollar Round Table and an agent for more than 30 years, he is also a certified life underwriter (CLU), which means he has taken advanced training in insurance. Metropolitan is the second largest company in the business, with $56 billion in assets.

"My personal belief is that, if you love your family, you should be covered with seven times your annual gross income," Pai said. "You need a minimum of $165,000 in more insurance," which he said should be in the form of a whole life policy. He did not quote a price.

Likening whole life to a Lincoln automobile, he said, "If you need to go to the District, you go on a Metro bus or a Lincoln. You can go with term, which is cheapest."

Though Pai is licensed to sell insurance in Maryland, he said he knew of no state requirement that he take into account the cost of money in comparing such policy values.

"For whole life, we are the cheapest, not only for mutual companies but also for stock companies," he said. "We are also the cheapest in term insurance."

Asked to support his statement, Pai said, "It depends on how many companies I look at. There might be a cheaper one. I don't know. He the agent can only talk about what he has seen."

In fact, after 38 years, Metropolitan's whole life policy is the seventh cheapest among the 10 whole life policies compared with the Computone figures. Its term policy does much better, ranking second cheapest.

Richard R. Shinn, who recently retired as chairman and chief executive of Metropolitan, said consumers are interested in more than price.

"In many ways, they are buying the confidence and credibility of the individual agent and the company he represents," he said in an interview. "I happen to think that when you buy from a big company--within a reasonable amount--you get about the same price."

Until October, Ernest (Red) Pierce was an agent in the Rockville office of Equitable Life Assurance Society of the U.S. He had spent three years with Equitable, the third largest company in the business, with $41 billion in assets.

Calling term insurance a "rental policy," Pierce said, "At the 11th year with whole life, it'll give you a chunk of cash for all the premiums. The cost is zero."

In an interview, Coy Eklund, president and chief executive officer of Equitable, said he knew of no reason that a whole life policy could not be described as "free," even if an agent failed to account for the time value of money.

"We have a stock answer that our training school tells us to say when people ask about prices: 'There are 1,900 companies in the country, and no two are alike. Where do you stop and where do you start?' You buy from an agent you feel comfortable with," Pierce said.

"If this is the amount I can confuse you with in a few minutes, think of how I could confuse you in an hour. As a consumer, you really don't have a chance," he said. Pierce recommended $100,000 in whole life coverage, at a cost of $2,084 a year.

When asked about the Maryland insurance regulations, he said, "We don't discuss the time value of money with a 22-year-old kid who is going to spend the money on Schlitz. He is going to blow it away."

In a conference room of Equitable's Falls Church office, Helena Nathan, an agent with Equitable for two years, said, "Have you thought about whether you'll need to support your parents? Disability insurance? Social Security benefits?"

In a subsequent meeting, Nathan recommended $25,000 in whole life coverage and $35,000 in term. The whole life policy would cost $1,924 a year; Nathan did not quote a price for the term coverage. She said she could get the interest-adjusted figures, but, she added, "I can't tell you what the interest-adjusted figures mean. A CPA or engineer every now and then will ask about them."

Confirming this, Nathan's manager, Raymond J. Botello, said, "Generally speaking, the majority of the people we deal with don't look at price."

Joseph P. Castiglia, an agent in Aetna Life & Casualty Co.'s Chevy Chase office, has been with the company for 12 years. Aetna is the fourth largest in the business, with life insurance assets of $31 billion.

Castiglia arrived at the reporter's home and spread some computer print-outs on the dining room table. He recommended coverage of $25,000 from an Aetna whole life policy, which would cost $600 a year, with an optional $100,000 in term coverage.

"You might find one or two lower than Aetna in the 1,900 companies," Castiglia said.

While Aetna's whole life policy compares favorably in the first seven years, its cash-in values rank near the bottom of the 10 companies compared. By the 38th year, for example, Northwestern Mutual Life Insurance Co.'s basic policy yields twice as much as Aetna's policy if surrendered for cash, according to the Computone figures. For the same cost, Northwestern Mutual also pays 38 percent more in death benefits at that point.

Asked how he supported his statement, Castiglia said, "It's based on the brochures from other brokers and rates I get."

Kenneth P. Veit, an Aetna actuary and vice president who until recently was in charge of life insurance, said, "Even for us it is difficult to compare policy prices. What does the consumer do?"

When asked how consumers can compare prices, John H. Filer, Aetna's chairman and chief executive officer, said: "Go to an agent . . ."

Ben Ritter of New York Life Insurance Co. first wanted to know how much the reporter could spend each week on life insurance. New York Life is the fifth largest company in the business, with assets of $23 billion.

Ritter, of the company's Washington office, has been an agent 17 years. He is a member of the Million Dollar Round Table.

"A term policy is like renting a house; you don't own it," Ritter said. He suggested a combination of $25,000 in whole life and $75,000 in term insurance, costing $736 a year.

"I don't want to say whole life is better," he said. "The question is, will you invest the difference?"

Asked how New York Life's rates compare, Ritter said, "We are not the lowest. We take pride in the fact that no matter where you move, you'll have a New York Life office and agent."

A response to a New York Life mail solicitation brought a visit from Maurice Gilbert of the company's Chevy Chase office. Gilbert, who has been an agent for 23 years, is also a member of the Million Dollar Round Table.

Gilbert recommended $130,000 in whole life coverage at a cost of $2,561 a year.

Asked how New York Life's rates compare, he said, "There isn't much of a spread in the price because of the competition among the companies. You're talking about a $50 a year spread on a yearly premium of $2,500."

When asked for support for his statement, Gilbert said he would mail it. When the documentation did not arrive, Gilbert was asked a second time to provide it. It never came.

According to the Computone figures, the first-year payment on a $100,000 policy from one of the 10 largest companies compared can vary by as much as $693.

Because of a special exemption from federal regulation granted by Congress in 1945, insurance is the only financial industry regulated solely by the states.

A 1979 report of the General Accounting Office, the auditing arm of Congress, found the cost of maintaining 50 separate insurance departments was $122 million a year, about as much as the combined budgets of the Securities and Exchange Commission and the Federal Trade Commission. Each state department is responsible for formulating and regulating its own laws, which govern all types of insurance, from life to property casualty and health.

"I have 25 employes including secretaries and regulate 950 companies and 23,000 agents. It just can't be done," said Montgomery of the District's insurance department, which has an $805,000 annual budget.

According to White, chief actuary of the New Jersey insurance department and former associate actuary of the American Council of Life Insurance, state regulators usually end up adopting what the industry proposes, rather than the other way around.

"The problem is a simple one of money," said Richard V. Minck, executive vice president of the American Council of Life Insurance. "You certainly can't expect someone who has four people in his department and pays them $18,000 a year to do a good job of it."

Minck pointed out that the regulators get few life insurance complaints from the public. "Unless somebody has experience in it, he has no way of knowing there was a misrepresentation," Minck said.

For all the problems surrounding cost disclosure and selling techniques, life insurance funds over the years have been safe, and claims generally are paid promptly. In the past 20 years, the price of life insurance has declined 22 percent, due to a doubling of the companies' investment returns coupled with a 22 percent drop in the death rate.

"Regulation by the states is vastly superior to what it would be if it were regulated by the federal government," said Prudential's Beck. "No policyholder to my knowledge has lost his funds in a life insurance contract. I don't know of any other business where that's true."

Still, the prices of most other products are easier to understand. "Life insurance companies make the policies more complex to make it difficult to compare the price," according to Francis E. Ferguson, chairman of Northwestern Mutual, the ninth largest in the industry. "It's difficult to get the industry to agree on how to see if someone is best when only one is going to be best," he said.

"If it turns out there is a good method for disclosing prices , we'll jump on the bandwagon," Minck said. "Having something people could use is, in the long run, in the best interests of the business."