Like many people, the first place I turn for information is usually the web. Nowadays, we can purchase nearly any type of insurance online with just a few clicks of the mouse. This can be both good and bad, and I think online purchases may have some disadvantages, especially when it comes to life insurance.
I will walk through the process of purchasing a term life insurance policy on the web versus dealing with an independent insurance agent.
I’m an agent, so of course I think agents do a better job then our online counterparts, but please read below and decide for yourself.
Pre-Sales Information Gathering and Advice
When you first decide to purchase life insurance, you will have to do some initial research to help pick the right policy.
A few considerations:
- What type of policy? Term, whole life, universal life?
- How much insurance do you need?
- How long do you need the insurance?
- What is your monthly budget? How much can you purchase based on that budget?
- What company to choose?
There are more to add to the list, but your initial research will either have to be done solely on the web, or you can speak to your agent for advice. Looking for good advice online can be very time consuming and some things may be overlooked. If you decide to work with an agent, they will help you with all of the questions above and will probably bring up some addtional concerns that you may not have thought of.
You’ve done your research and you are now ready to get some quotes. Some think that they will get lower rates by purchasing online because they can cut out the middle man(agent). This is simply not true. Just to be sure, I quoted myself at a major online site and compared it to my own quotes. Same price!
Another way to look at it is this. If your premium for a ten year term is $500 per year, the agent might get 50% commission. So if you average out $250 commission over ten years, that is about $2.08 in commission per month. So even if you could cut the commission, you are saving a whole $2 monthly.
A quote is just a quote so regardless of what the website or your agent says, the actual rate will be determined by the underwriter when they issue the policy. If you are making comparisons, make sure everyone is using the same rate class to be fair.
Online quoting is very easy. You can probably get quotes from 30 carriers in a matter of minutes.
Some agents will also quote 30 carriers, or they will select a few that they think will work best for you. They probably know of some carriers that are more lenient with underwriting, or some that may consider cigar smoking as non-tobacco or other details that may benefit you.
At Glenn Insurance, we carefully selected a few different carriers that underwrite fairly, and they will almost always be in the top five for lowest price. Typically the top few carriers will only vary by a few dollars per month in the quotes.
I think the advantage will be with the agent, because they will know some of your medical conditions ahead of time and can quote appropriately. As long as they use the top companies, this will be your cheapest route.
Insurance carriers have teams of underwriters that will use your personal and medical information to decide how “risky” you are, and assign you to a rate class. The rate classes are usually some variation of this:
- Super Preferred – least expensive
- Substandard – Rated Policy – most expensive
The underwriters use criteria set by the insurance carrier to place you in one of those categories. Some of these rules are strict, but others may be up to the underwriters discretion. If you are on the border, the underwriter gets to choose based on their professional opinion.
Since underwriters don’t have the chance to meet you in person, they have to rely on the information in your application to base their decision. If you purchase online, they may not be as agressive with thier underwriting decision especially if you are in between classes. This is where the value of an agent can come in. A good agent can write a letter to the underwriter or speak to them directly to help you get a better rate. Sometimes they can get you from Standard to Preferred, which will save you a lot of money in the long run.
Service Issues and Questions
Life insurance does not require much service once the policy is delivered, but things do come up at times. Things like beneficiary changes, billing issues, address changes, etc… If you do not have an agent, you will be calling the 800 number and will be responsible for all follow up. If you do have an agent, you can make one quick call, tell them what you want to do, and they will take care of the rest.
No one wants to even think about this, but remember why you bought the policy. Should anything ever happen to you, you want your loved ones paid quickly and correctly so they can get their financial situation in order.
If you purchase online, your beneficiaries will be responsible for contacting the insurance company and getting the proper forms in order. If there is any holdup with payment, they will be responsible for all followup.
If you are working with an agent, this is something they can be a huge help with. With someone passing, the last thing a claimant wants to do is to fill out forms and deal with the insurance company. Your agent will walk everyone through the process and make sure everything is done timely and correctly.
I tried my best to be fair to both sides and let you decide if purchasing online is right for you. I encourage a litte shopping online but in the end, I think your best bet is to find an agent you trust. Having someone help out when needed is worth a lot more than the perceived convenience of online shopping. Life insurance claims are filed at the worst possible moment for your family. Should something happen, do you want your loved ones dealing with an 800 number or a trusted advisor?