19 Aug 9 Tips for Purchasing Life Insurance From a “Greedy” Insurance Agent
“Don’t be surprised if you find yourself sitting across the table from an insurance agent who tries to push a permanent insurance policy, like whole life or universal life insurance those policies generate higher commissions, so there’s that temptation for the agent.”
Siegel, Bernard, T. (2016, February 19). Life Insurance Buyer’s Guide: What Type How Much and Who will Benefit. New York Times, NY ed., Your Money
Insurance Agents: The Greedy Professionals?
We life insurance agents make more money on higher priced policies than on lower-priced policies. Real estate agents make more money on higher price properties. Financial advisers make more money on portfolios that hold greater assets and lawyers make more money when they can bill for more hours.
Ethical behavior is a character trait which bears no relationship to profession or title.
Sandpaper or a Rasp?
Knowing which tool to use is an important to an insurance professional as to a carpenter. While term insurance has lower premiums and may be the correct solution for some clients, for others, it can ultimately be a very costly choice especially if the term policy does not allow for future conversion to a permanent policy regardless of health.
The lowest cost term insurance is usually offered by companies that do not offer permanent insurance. Premiums on term from companies that offer conversion to permanent insurance features are likely to be higher. Why is this important? If more coverage is needed, or coverage is needed for longer than had been anticipated, will insurability be an issue? I challenge anyone to know what they will need in 10 or 20 years. Who has a guarantee that their health will not decline: That no accident will have been
encountered? Who can foresee increased obligations? The price of insurance is good health, not premium. No matter how wealthy you are, you can’t purchase insurance if your health is poor. To quote MetLife’s tagline: “Life insurance is for the “ifs” in life”.
Life insurance is most commonly first purchased to protect families against the untimely death of the wage earner. As children become independent, the need for income replacement morphs into covering other needs; college and graduate school funding, supplemental retirement income, debt settlement, estate equalization, wedding costs, legacy gifts for grandchildren, charitable giving and chronic health care needs to name a few. While some of these represent “wants”, paying for chronic health care is a serious “needs”.
With the population aging and life expectancy increasing, many more of us will need to find ways to fund chronic health care services. Recognizing that Long-Term Care Insurance has become too expensive for many, life insurance companies are now offering policies that allow people to use their policies for living benefits, i.e. Long-Term Care services.
In addition, life insurance is an asset that can be sold for cash. Many seniors are now finding the permanent life insurance that had been purchased to protect their families and no longer needed can be sold for more than the surrender value. This asset can be used for anything but often it is used in lieu of traditional Long-Term Care insurance.
Board Certified Specialist or Primary Care Physician?
Although primary care physicians are exposed to many services during residency, you probably expect to be referred to a specialist when special knowledge or skill was indicated. While most financial advisers understand the need for insurance, they are not usually well versed in the nuances. Most concentrate on managing money. Conversely, most insurance professionals although licensed, may not be attuned to market fluctuations and investment products. One can’t be expert in all things.
9 Tips for Purchasing Life Insurance
- Buy the right amount.
- Make sure if you purchase a term policy it can be converted to a permanent one…..just in case.
- If you cannot afford to purchase all permanent insurance consider some “perm” and some “term”.
- Understand what is guaranteed and what is not.
- Check the financial ratings of the insurer and the reputation of the agent.
- Life insurance is always purchased through a licensed producer, whether purchasing online, through a financial adviser, a captive agent (primarily representing one company) or an independent producer.
- Insurance rates are filed with the state. No one can offer you a “bargain”. Identical policies from the same company will always be the same price.
- Don’t buy what you don’t understand.
- Review your life insurance needs every few years especially after a major life event. BONUS TIP
- Ask about adding a chronic illness or long-term care rider. These riders ensure you can advance the benefit for your own use when you might need care due to a chronic illness or accident.
Your life insurance may be an asset worth far more than your home, know the difference between low cost and good value.