Buying Life Insurance can be a great financial protection tool when done properly. It’s the goal of this short guide to help you avoid 5 common pitfalls that may not be obvious.
Life insurance often seems to be a mysterious product. There are tons of carriers, policies, agents, types, and options that are often unclear. Just as confusing are often the agents that you meet with. That’s the topic of the first trap!
Life insurance agents can fall into several categories. The most frequent being captive, non-captive agents, and fee based consultants occasionally.
So what’s the difference?
Captive agents are agents that generally represent just one life insurance carrier. That means that they are under obligation to offer only whatever that carrier provides. It can be good for you if they represent a top notch carrier. It can also be bad for you if the carrier is not your best option.
If an agent can only offer one carrier’s products, then that’s all they can really offer you whether good bad or mediocre. If it’s a great company that they are captive to, then it’s probably not a problem.
If, however, the carrier offers a noncompetitive policy then clearly it could be a problem. What makes matters worse is that most clients aren’t life insurance experts to be able to distinguish a good product offer from a bad one.
Being unaware that they can only offer you products from a single company they represent could be cause for concern if they don’t offer the best policy for what you need.
Next, there are Non-captive agents. This type of agent is often referred to as an Independent Broker, or Independent Agent. One of the best benefits of an Independent Agent is that they can and often do represent numerous carriers.
Instead of just offering whatever one carrier offers, they can offer the most tailored solution for your needs. As an example, if your biggest challenge to getting life insurance is health problems, they will try to place a policy with a company that has liberal underwriting guidelines for your situation.
Similarly, if you have great health they will often be able to place your policy with a carrier that has low or even bargain pricing. Sometimes prices change for life insurance carriers, and Independent Agents can offer whichever one has the best affordability for your needs.
Fee Based Consultants
Consultants often are able to provide you advice for a fee without being able to receive commission on the products they represent.
That means their advice on which carrier to place your policy with should be unbiased – or at least far less biased. In exchange for providing you with unbiased information they often receive a fee instead of a commission.
With Captive, or Non-Captive agents, you generally pay no fee, but they receive a commission instead.
An interesting consideration for the life insurance agent or consultant you use is how they are paid. It certainly can’t hurt to ask how they are compensated.
Dealing with a captive or non-captive agent isn’t necessarily a bad decision if they have your best interests in mind above their commission check. Choosing a relevant life insurance makes it feasible for the customers to pay the premiums at time. apart from this there are also ways that can be used to change the existing plan.
Many agents are honest, but dealing with one that doesn’t offer the best policy for your needs is a big red flag. Likewise dealing with an agent that offers you a policy just because it provides them the highest commission is another trap to avoid.