Should I find an insurance agent when buying life insurance?
It all depends on whether you are planning to purchase a permanent or a term life insurance policy.
Before even considering dealing with an agent shop around to get a basic idea of what life insurance products are on offer. Some policies are more complex and require the use of an agent, whereas others can be purchased directly over the phone.
Do not rely on an insurance agent to choose the type of policy that best suits your needs: most of them are likely to recommend a cash-value policy that will earn them five to ten times higher commissions than if they were to sell you term insurance. This practice often results in young families buying expensive permanent life insurance instead of a more affordable term policy, and still remaining underinsured.
When to Consider a Life Insurance Agent
Permanent life insurance policies are usually very complex and require considerable expertise in selecting the right product. Furthermore, as mentioned, agents are almost always more willing to sell cash-value policies because of the higher commissions.
In order to minimize the possibility of being sold the wrong policy or becoming the subject of deceptive sales practices, be sure to find a top agent who is competent, skilled, and is a qualified Chartered Life Underwriter, Chartered Financial Consultant or Certified Financial Planner. You won't pay a dime more for choosing the best agent as agents' commissions are determined by the amount or premium you pay, and not by the practitioner's expertise.
As for the types of agent you can choose from, the career life insurance agents have the advantage of specializing in life insurance and most of them are qualified Chartered Life Underwriters (CLU).
Multiple policy agents, who have sold you auto and home insurance, are not usually a good bet but you can ask them to refer you to a good life insurance specialist.
And finally, financial planners are the third group licensed to sell life insurance. However, be wary of those who recommend that you buy permanent life policy solely as an investment.
Buying without an Agent
If you are planning to purchase a term life policy, you can often do without an insurance agent. Term life insurance is usually so simple that it has been turned into a commodity which you can purchase directly over the phone or online. Here are a few options allowing you to buy life insurance without an agent:
- The Internet is the best way to comparison-shop for term life insurance.
- Creditors - such as banks, mortgage companies that advise you to buy credit life insurance which pays off your debts in the event of your death. However, it is not advisable to opt for this service for two reasons: rates are higher than in the open market, and the creditor, and not your family, is the beneficiary.
- Direct mail/telemarketing phone solicitations: stay away from the 1-800 number sources.
- Slot machines - selling the so-called "fear insurance" at airports. They only cover death by accident.
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