Category: The Truth About…

how to work with life insurance agents

The Truth About Life Insurance Agents

Not all life insurance agents are equal

Maybe you’ve recently received a call from your cousin’s son, or a former co-worker, or an old school pal who wants to meet with you to talk about their new career. Of course you agree out of courtesy, but you’re worried they’re going to try to sell you something you don’t want.

Well, don’t despair, they might have some valid advice, but whether it is good or not, may be up for debate.

Inexperienced agents can make any number of blunders when it comes to advice. And those blunders can cause problems that may not be discovered until years later… when any number of features / benefits / options weren’t explained, talked about, included, used, accessed, or available in the policy that a person took.

People tend to forget that an insurance policy is a that is made with an insurance company

These contracts can be a few pages, or dozens of pages in length, with various features and benefits — above and beyond just a death benefit — that may have time horizons and expiration dates to using the additional feature. Also, sometimes a feature is talked about during a conversation, but the actual policy taken by someone doesn’t contain the feature or benefit that was talked about because of an agent’s inexperience, or the product finally taken was different than the one that was previously talked about. Again, this oversight may wind up hurting the people that the inexperienced agent thought he or she was helping.

These are just some of the reasons working with experienced agents makes a tremendous difference. Even for individuals who are just looking to cover their 30 year mortgage, or protect their spouse and children, or want a final expense or legacy policy, should seek an experienced agent who can examine the financial and personal factors, and make recommendations based on the particular circumstance. Speak to an experienced professional.

life insurance protecting family

The Truth About Whole Life Insurance

First of all, what is whole life insurance?

Whole life insurance is a type of life insurance where the death benefit is essentially a permanent obligation of the insurance company. Whole life insurance typically has certain guarantees made by the carrier — 

✓ the death benefit is guaranteed

✓ the premium is guaranteed to not increase

✓ cash-value available while the insured is alive

What are some unique features of whole life insurance?

Insurance companies may have other features and benefits which may or may not be guaranteed, which are a part of their particular whole life product. These could include various riders, such as — 

  • waiving the premium if the insured becomes disabled
  • advancing a portion of the death benefit if the insured meets a certain definition of incapacity or terminal illness
  • adding extra premium to grow the death benefit and cash-value, exchanging insureds
  • additional policy purchase guarantees, and additional growth of the policy through dividends which the company may have the discretion to pay out.

Decades ago, and still today with some companies and certain products, whole life insurance (also known as “ordinary life”) was the only type of life insurance coverage available. Essentially, a person paid premiums, and should they pass away before the actuarial table said they statistically should, the company would pay out some multiple of what they had received in premium payments. If the person lived to about life expectancy or longer, the company’s payout might roughly equal or be more than the total premiums ever paid. As actuarial science and statistical modeling advanced, companies could make better predictions about an individual’s statistical life expectancy and design whole life products that could grow in death benefit, cash-value, or both, over time. 

What is cash-value growth in whole life insurance?

Certain whole life policies from certain companies can provide cash-value growth over time, in a tax advantaged environment. With these types of policies, aside from having the insurance protections, what a policyholder is essentially doing when they have a whole life insurance policy, is leveraging the general account of the company, and if it is a participating policy, the profitability of the insurance company for growth of the policy. 

So what does this mean? In general, it means that a good whole life insurance policy from a company with a reliable dividend history and a good rating of their general account holdings, can provide a relatively safe and fairly reliable growth of cash, and with a properly managed policy, in a tax deferred manner, with tax-free use of much of that cash, while having life insurance and potentially other protections at the same time. The tax advantages of a whole life policy can mimic the tax advantages of a ROTH IRA, but without all of the restrictions imposed such as income ceilings, an earned income requirement, and contribution limits. 

Lastly, your independent agent should be able to produce and review a VitalSignsⓇ comparison of the carriers he or she is recommending to you. In the hands of an experienced agent, the reports on the various carriers can help guide your decision to a company you think is most suitable for your goals. Especially with long term goals, there are a multitude of important factors when deciding on which carrier and product to use, so decisions may be around the product, others may be around the company. This is where an experienced independent agent can be a tremendous resource to you with regard to valuable information that may save you time and regret in the future.

How do I get a comparison of different whole life insurance carriers?

Lastly, your independent agent should be able to produce and review a VitalSignsⓇ comparison of the carriers he or she is recommending to you. In the hands of an experienced agent, the reports on the various carriers can help guide your decision to a company you think is most suitable for your goals. Especially with long term goals, there are a multitude of important factors when deciding on which carrier and product to use, so decisions may be around the product, others may be around the company. This is where an experienced independent agent can be a tremendous resource to you with regard to valuable information that may save you time and regret in the future.

term life insurance benefits

The Truth About Term Life Insurance

Term life insurance - a great deal?

Term insurance can be a great deal — depending on your point of view — it’s great for the insurance companies because fewer than 2% of term life insurance policies ever pay a death benefit.  The great news is that you’re still alive! The bad news is, you don’t get that money back.

Term insurance allows you to have a larger death benefit for a lower premium than you could buy through a permanent insurance policy. 

But the purchaser of term insurance should know that a term policy is not meant to be in force when the insured statistically will trigger the death benefit. For this reason, term policies are great when your circumstances are that you only need temporary coverage. This includes the income producing years of working people who have others in their life who depend on their income (generally referred to as an income replacement need), a debt obligation that is to be paid-off in a certain amount of time (mortgage protection, home equity or business loan pay-off, unexpected buy-out of a business-partner’s interest, and so on.) 

Not all term life insurance policies offer the same benefits

For these reasons and others, term insurance can be a cost effective way to cover an economic loss, caused by someone’s death, where the risk or need is temporary, but the features and benefits in any particular product should be fully understood and compared to other company’s products before deciding to do an application with any particular company. 

One major area often overlooked by inexperienced agents and their clients is — what other features and benefits [or the particular terms of a feature of benefit] that are in one company’s product, but not “similar” products from other companies. Said another way — not all policies are the same. Different products from different companies offer different things, and an experienced agent will be able to identify the differences and explain it all to you. 

Also, your independent agent should be able to produce and review a VitalSignsⓇ comparison of the carriers he or she is recommending. In the hands of an experienced agent, the reports from the various carriers can help guide your decision to a company you think is most suitable for your goals. 

An experienced independent agent can be a tremendous resource to you with regard to valuable information that may save you time and regret in the future.

the risks of buying life insurance online

The Truth About Online Life Insurance Quotes

There is no such thing as discount life insurance

By law, an insurance company is required to charge the same premium rates, for a given product, to everyone — no matter what agent or company they use to obtain the policy.

This is partly because not doing so creates an unfair marketplace for the consumer, potentially reducing service and information, which could then potentially affect particular groups, classes, or people in certain geographic areas.

It also can lead to a condition called adverse selection — where a certain risk isn’t properly accounted for, or fully paid for. Adverse selection — which is created by a variety of factors including discounts or rebates — can jeopardize an insurance company’s general account and also cause some people in the insurance risk pool to effectively be subsidizing others in the risk pool, and could ultimately lead to a company’s failure.

 

Buying Life Insurance Online

“Buying” life insurance online creates a perception of savings, and in many cases, deprives the buyer of the support from a professional who can effectively guide them, free of charge.

Sadly, online marketing of life insurance seems to give many people the impression that life insurance is a commodity that can be quoted, discounted, and obtained completely online and that there is no difference between companies or their products. Websites quoting premiums rarely reflect the reality for most folks by definition.

By reading the fine print on the various websites, you will find that the advertised quote is at the best possible rating — meaning, it’s someone with a near perfect medical history, optimal weight, no adverse family medical history, and with no chronic conditions.

This turns out to be a small portion of applicants… and no telephone representative, or even an agent, can determine the applicant’s actual rating; that can only be done by underwriters at the insurance company, which is issued after an extensive review of the applicant’s personal health history as noted by their medical exam report and lab test, as well as a copy of their medical record from their primary physician.

The process of obtaining a life insurance policy can take several weeks, and sometimes months with more complex medical histories, and many times this discourages the applicant from looking elsewhere when they feel they’ve been intentionally misquoted a rate (just so someone could capture their business and shut out other competitors, who may have been more realistic in their quoting.)

Seeking An Experienced Professional

It’s important to speak with an experienced, knowledgeable, licensed agent who understands all the factors in play. The agent can advise you on the various features or benefits that are built into one company’s policy that may not be in another’s. Your independent agent should be able to produce and review a VitalSignsⓇ comparison of the carriers he or she is recommending to you.

In the hands of an experienced agent, the reports on the various carriers can help guide your decision to a company you think is most suitable for your goals. This is where an experienced agent is your best ally, as someone who can provide valuable information and saving you time.

With a knowledgeable, experienced agent, you can get a realistic quote, given your personal and medical history. Your agent will also assist you in presenting all the relevant information so that the underwriters can give you the best possible rating.

And, many people are completely unaware that while working with the right agent will help your underwriting go more smoothly and get you the best possible rating and therefore lower premium, it is all done for the applicant with at no cost to them.

An experienced independent agent is a tremendous resource who can provide you with detailed, valuable information which will save you both time and money. Remember, an independent agent is licensed at a state-level and is uniquely expert in insurance laws. They are your best resource to getting the best policy to meet your needs.