Should You Use a Life Insurance Agent?
B.A. Risk Management
Life Insurance Agent
According to the Insurance Information Institute, there were 841 life and annuity insurance companies offering policies in the United States as of 2018. That's a huge number of companies to choose from when you're shopping for insurance. Plus, most of those 841 companies offer multiple types of life insurance, adding even more options. If that seems overwhelming to you, you're not alone. That's where life insurance agents come in. Life insurance agents can help you sort through all those policies to show you the ones that will fit your needs and that you're more likely to be approved.
What is a life insurance agent and what do they do?
A life insurance agent is a licensed professional who can help you select and purchase a life insurance policy. Agents can help you figure out the type and amount of coverage you need and can guide you to policies that fit your needs. Agents work with you when you're shopping for a policy. They can show you possible terms and prices before you apply and let you compare life insurance rates.
An Agent Can Make Things Easier
A life insurance agent can handle communication with the insurance company for you once you select a company and submit an application. Your agent can help make sure you send in all the right paperwork and can be a liaison between you and the insurance company. This can make the process less stressful for you. For example, if the insurance company needs more information to process your application, the agent can let you know exactly what to do.
An agent can also help if your application gets denied. Your agent can work with you to try and secure different coverage. If you're denied due to health conditions you can improve and want to go after the policy again at a later time, an agent can help with that, too. Your agent can help you reapply once your health has improved. This can save you time and effort and can make your reapplication a lot less stressful.
You don't have to use an agent when you buy life insurance, but their guidance can often be a big help. Shopping for life insurance on your own can feel confusing and overwhelming. The sheer number of companies, policy types, and terms can make it hard to know exactly what you need. Things can get extra confusing if you have a high risk condition that might make getting a policy at a good rate more challenging. This is where a life insurance agent's experience and knowledge can come in handy.
Pros and Cons of Using an Agent
Using an agent isn't right for everyone. Some people will find their expertise helpful, but other people might be able to secure a better price and policy working on their own. Weighing the pros and cons can help you decide which path is right for you.
Some pros to using a life insurance agent include:
- Agents can offer guidance through the entire process
- Agents who are independent or brokers can match with a wide variety of policies from several companies
- Agents know what the underwriting standards for policies are and can help you apply for policies you're likely to get approved for
- Agents reduce your chance of denial by pre qualifying you for policies before you submit an application
- Agents can assist if you or a beneficiary need to make any claims
- Agents can help you make changes to your policy once it's in force
The ability to prequalify for a policy is a major benefit of working with an agent. It lessens your chances of a denial and allows you to feel more confident about the process. Plus, avoiding an application denial helps you down the road. When you have a policy denied, that denial will show up on future insurance policy applications. The underwriters will see the past denial, and your application will go through a much more intensive underwriting process. This could mean a lot more work for you. Applying for a policy you've prequalified for with an agent can save you from having this stress down the road.
However, there can be some drawbacks to working with an agent.
Possible cons to working with an agent include:
- An inexperienced or less skilled agent could select policies that aren't right for you
- An agent could mislead you into buying a more expensive policy than you need
- An agent could only show policies from one company
You shouldn't run into these problems with an experienced, respected, independent agent, but you should be on the lookout for them. It's a good idea not to work with insurance agents who seem to be pushing a particular product or policy. As a rule, you want to work with an agent who can give you answers, not a sales pitch
Captive vs. Independent Agents
Captive agents work for specific insurance companies. Independent agents, as the name implies, aren't tied to any company. So, unless you've already decided there is a specific company you want to work with, it's best to go with an independent agent. Independent agents can look at policies from multiple insurance companies. They can help you get a policy at a better price by comparing what's available.
What About Buying Life Insurance Online?
You can search for policies online. This is often a very convenient way to shop for and buy life insurance especially with the rise of no exam life insurance products. However, it can also be complicated and time-consuming. You could find yourself researching and still not sure which company makes the most sense for you. You might have a hard time figuring out how much insurance to buy, what company will suit your needs, and what policy you're likely to get. An agent can help clear up your questions and address your concerns about buying a policy.
How Agents Make Money
Most life insurance agents don't make a standard salary. You also generally won't pay for an agent's services. Instead, agents get a commission from the policies they sell. When you buy a policy through an agent, the agent makes money from the premiums you pay. Agents earn a percentage of the premiums for every policy they sell. Generally, agents earn a large sum based on the cost of your policy and the premiums you'll pay in the first year, and then continue to receive small payments over the life of your policy.
Does it Cost More to Use an Agent?
It might seem like using an agent would cost you more. After all, agents earn money from the premiums you pay. Surprisingly, this isn't the case. An agent's commission is already built into the price of your insurance premiums.
Companies are required to create underwriting rate tables and file them with the state insurance department. These rates are already set in. This means an agent can't sell you a policy at a different rate than you'd get if you applied on your own. The commission the agent gets is already part of the price. This is true no matter which agent or company you choose.
Checking an Agent's License
You can check on an agent's license using the National Association of Insurance Commissioners' (NAIC) Consumer Information Source (CIS). You can search your agent's name on the NAIC CIS to make sure they're licensed in your state. Plus, the NAIC CIS will show if the agent has had any complaints made against them. You can also check on your agent's license by calling your state insurance board. It's always a good idea to check on your agent's license to make sure you're working with a trust professional.
When it comes to using an agent, the choice is completely up to you. Some people might prefer to select, apply for, and buy a policy on their own. However, if you have questions or need guidance, an agent can make the process much easier for you. If you're thinking about using an agent, you can give us a call today. Our agents can help you find the best policy to meet your needs and protect your family.