September 2007 is Life Insurance Awareness Month. I won't bore you with what life insurance is or why/when one needs life insurance. If you want to know, just read the info from SBLI. I'm just writing about how you go about buying life insurance.
First let me get this out. This is not a "sponsored" post. I'm not an insurance agent. Nor am I affiliated with any businesses I mention here.
1. Free life insurance from work. Many employers offer free group term life insurance as a part of their employee benefits package. Typical coverage is 2 times base pay. It's free, except the cost of insurance over $50,000 is taxable to you as "imputed income" according to a rate table (pdf, page 3) established by the IRS. Free is nice but the coverage is often not enough. You may still need to buy some more coverage on your own.
2. Extra insurance from work. After the typical free coverage of 2x base pay, you can often buy extra group term life insurance coverage through your employer's group plan. Unless you are in poor health, this is usually NOT a good idea. More details are in my post last year on open enrollment choices.
3. Term life insurance. For most people, this is the best approach for obtaining life insurance coverage. Ignore all the confusing noise about other types of life insurance. Just buy term. And the best place to shop for term life insurance is term4sale.com. Term4Sale does not sell insurance. It lets you compare quotes from many companies. It then gives you names and phone numbers of 3 independent agents in your area.
Agents?! Who needs agents in this Internet age? Do you not get lower rates if you cut out the agents and buy directly from the insurance company? What about those Internet sites where you can compare rates AND buy insurance in one shot, you know, like QuoteSmith (now Insure.com), AccuQuote, SelectQuote, IntelliQuote, etc.? Well, it turns out picking up the phone and working with a local agent is still the smartest way to buy term life insurance.
Insurance is a funny business. It's licensed and regulated by the states. The insurance rates are filed with the states' department of insurance. Unless a company doesn't sell through agents, period, the rate is the same whether you buy directly from the insurance company or go through an agent. If you use an agent, the agent earns a commission. If you go to the insurance company directly, they just pocket the commission themselves. And those Internet sites that let you compare rates and buy insurance at the same time? They ARE agents, just agents with a large Internet marketing budget.
Term4Sale is great because it doesn't sell insurance. Therefore it includes quotes from as many companies as possible. It won't lead you to companies that pay it the most money. There is no conflict of interest. It doesn't ask for your name, phone number, or e-mail address because it's not trying to sell anything to you. You just fill out a simple form and you will get a list of quotes. Change some options and see how the quotes change. After you get an idea of what the policies cost, click on "Find An Agent" and you will get 3 names and phone numbers for agents near you.
Working with a local agent is smart because you get to talk to a real person who is knowledgeable about the business. Life insurance rates are dependent on health underwriting class. Not all companies treat the same health issues equally. You may qualify for preferred plus with one company but only preferred with another. A local agent would know which company is picky on what issues and qualify you for the best class with the right company.
Will the agent try to sell you more expensive whole life, universal, or other "permanent" life insurance? Mine didn't. If they do, call the next agent on the list. My agent Ron was very professional. He helped me with the insurance application. There was one issue the insurance company had to put in a restriction for one year. After one year was up, without me asking for it, he called me and sent me the form to lift the restriction. When I needed disability insurance, he helped me again. There has never been any pushy sales pitch. After all these years, I never had to meet my agent face to face. Everything was done over the phone and by mail. Maybe I got lucky with a good agent. But I suspect if you contact an agent and let him/her know you got their name from Term4Sale, they will know what you are looking for and won't pull a hard sale on you, because they know the next agent is just one phone call away.
[Update on 9/19/2007] This is the fist post in a mini series on life insurance. Other posts in this series are:
2 comments:
I'm glad you're helping spread the message of the importance of life insurance. I completely agree with you on point #1 and #2 that you make: free group life insurance coverage from work is NOT nearly enough to protect a family from financial disaster and buying extra coverage through your employer CAN be very expensive.
Sites like term4sale, AccuQuote, etc. are good tools to get an idea of which company will give you the best deal. In fact, they are all the same quoting engine. Yet that does not mean they can give an accurate quote for every specific combination of lifestyle and health profiles.
That's why it's so important to use an agent to assist you in your purchase decision.
However, I don't quite agree that your local agent is the best agent to use. I think that an agent or brokerage firm that deals with multiple companies is the best. Here's why: when you go to a quoting system like term4sale, you can only punch in so much information and the computer will spit out an answer. Let's say the computer tells you that Prudential will offer you the best rate. So, you go to an agent that sells Prudential and maybe he also sells one or two other companies' products. Depending on your specific health and lifestyle conditions (like driving record, family history or even foreign travel), the most favorable rate might in fact be at a company other than those that your local agent sells.
An agent at a brokerage firm that deals with multiple carriers will know the ins and outs of each company (and are licensed in all 50 states). These agents can determine who will give you the most favorable rate for your specific condition. I hope that makes sense.
For consumers the main point should be shop around - use the interet to research but contact several different agents because as you mentioned, the rates are the same, however the way various cases are underwritten for lifestyle and health profiles are not.
Byron,
Thank you for your comments. I think other than the issue of local agents versus an agent elsewhere, you pretty much agree with what I wrote. If that's the case and you are indeed Byron Udell of AccuQuote, I'm flattered. I have a CEO reading my blog?
From AccuQuote:
"Byron Udell is founder and chief executive officer of AccuQuote. ... With more than 20 years of industry knowledge, Udell is widely acknowledged as one of the nation’s foremost life insurance and annuity industry experts. In addition to his law degree (JD) and Series 7 general securities license, he has earned the Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), and Certified Financial Planner (CFP) professional designations. ... Udell has written numerous life insurance industry articles and been cited in hundreds of business publications, financial books, and other periodicals."
I think the agents referred by term4sale are all independent agents representing multiple companies. They don't show captive agents who only sell for one company.
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