Can I Save Money Buying Direct From a Life Insurance Company

Can I Save Money Buying Direct From a Life Insurance Company
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    Can I Save Money Buying Direct From a Life Insurance Company? The short answer is…


    You can buy direct with many companies, but it will not save you any money. That’s right. Purchasing term life insurance direct from the life insurance carrier won’t save you a dime.

    In fact, it very well may cost you significantly in ways you never dreamed of. It can cost you time, aggravation, and of course- higher premiums. Today, we’re going to go over in depth why buying life insurance direct is not a good idea and how you can save considerably by using an independent agent who can find you a better deal from some of the top 10 life insurance companies in the market.

    Can I Save Money Buying Direct From a Life Insurance Company

    Whether you buy your policy from a life insurance agent, online term life broker or directly from the insurance company, you will pay the same rate for the same policy. 

    You’ll still need to go through all the same qualification processes and will be offered the same exact rate no matter who you choose to buy from.

    You might wonder why your price for life insurance policies are the same no matter where you purchase it from?

    It’s because life insurance products are regulated. They are not like a product you purchase at a store that two different stores are selling at different prices.  

    That said, even if you understand that you will not save money buying direct to the company, if you don’t use an independent life insurance agent – it may end up costing you much more.

    Let’s see why that is.

    Life insurance rates are regulated by law

    The rates for life insurance are regulated so they can’t be changed for a “weekend sale” or some random discount. Here’s why.

    Have you ever seen a spreadsheet so complicated it made your head hurt? A life insurance company pretty much has to put one together for all of their products. They then have to submit it to all the state governments that they want to sell their policies in. These spreadsheets, known as rate tables, inform the government how the insurance company is going to charge their customers based on their lifestyle and health conditions.

    There are several factors that go into setting their prices.

    1.  Determining Risk

    Life insurance companies have to determine the “risk” of someone wanting to buy their policy based on their lifestyle and health. They use tons of data to determine risk, such as mortality tables.

    For instance, if you smoke or used to smoke, you will pay more for a policy than someone who never smoked. If you have a history of diabetes, you will be a higher risk than someone who does not.   Lifestyles will include things like if you SCUBA dive regularly vs someone who participates in ballroom dancing.

    2.  Extra Expenses

    A small amount of the policy’s premium is used for marketing, an agent’s commission, the life insurance company’s overhead, and of course their profits.  

    This is no different than any product on the market, take your television as an example. You might have to pay $800 for your TV but it doesn’t cost that much to manufacture.  But once you add up all the features it comes pretty darn close. You can shop around and get deals on your TV but you cannot with your life insurance policy.

    3.  They need to follow the law

    To function legally, life insurance companies, agents and the quoting software must offer a policy based on the rate table they filed with the states they want to sell insurance in.  

    To summarize, there are no deals, close out sales, or discounts when purchasing directly from the life insurance company or an agent.

    A life insurance agent’s commission is built into the policy price whether you use an agent or not.  So, you might as well take advantage of their experience and use them because that is where the biggest difference is made.

    Top reasons you’ll lose money buying direct

    There are several reasons why buying life insurance direct from a life insurance company is a poor strategy. Here are some of the top reasons:

    1. You’re limited to the products of a single life insurance company

    If you deal directly with one life insurance company, you are limited to only their policies and product selection.  This insurance company will try to sell their best product to you, but that doesn’t mean it’s the best product for you. There’s a big difference.

    You could end up paying more than what their competitor might have been offering.  Just because life insurance premiums are regulated, doesn’t mean all policies are the same. Every life insurance company offers different rates depending on how they evaluate your risks based on your health condition or lifestyle.

    There are life insurance companies that evaluate heart conditions better than others while others are more strict if you have heart issues.  

    2. You won’t know if their policy is the best on the market for you.

    Unless you research and work with an agent who has access to multiple companies, you might be missing out on companies that will look at you favorably.

    When looking for life insurance it’s really important that you compare multiple companies and their policies.  If you shop with only one carrier, chances are you are missing out on a better price.

    The life insurance company you didn’t look at might not be as strict regarding your specific health, lifestyle, or family history.

    Only an independent life insurance agent can help you shop around by looking at multiple companies. In most cases, they’ll know the best companies for you, based on the information you provide them.

    The best and safest way to buy life insurance is with an independent agent. They can provide you the best life insurance policy that’s available on the market, instead of the best one that a lone life insurance company has.

    3. No support when you buy direct

    Buying life insurance can be really complicating to many people. There are so many parts to the process that can make it a bit overwhelming.

    If you go directly through a life insurance company, you will not have any support during the life insurance application process. You’re the one doing everything. Now you will get some help from a company employee, but they’re biased towards their company. You won’t get unbiased feedback from them because they’re loyal to their company and not you.

    The best part of using a life insurance agent, they’re working for you and your interests. They use multiple companies so there is no reason to be biased. They want to find you the best policy available on the market that you can qualify for.

    You will get excellent and knowledgeable support during the entire process. This includes shopping your case at the beginning and helping you through the entire application process.

    Applications take a while to get through the life insurance company’s approval process. Industry average is around 6 weeks unless you buy a no medical exam life insurance policy. If you go directly to a life insurance provider, you will have to wait to get an answer and you won’t have anyone to keep you informed.  Your Life Insurance Blog agent will keep you up-to-date and let you know how things are moving along throughout the process.

    4. Rolling the dice on your approval

    Another important point, let’s say your application is not approved?  Now what?

    There’s a significant disadvantage when you buy direct. When you buy direct and you’re approved as applied- everything is great. However, if you get declined by the company or they change your rate- you’re left with trying to find another company and starting the process all over again.

    That’s a nightmare that can be completely avoided using an independent life insurance agent. Who wants to fill out more applications or complete another medical exam and wait weeks not knowing if you’ll get declined or rated up again?

    So how does this happen?

    It could be as simple as accidentally leaving something out like a medication you took in the past or a medical condition that doesn’t seem significant to you- but is a major issue with a life insurance company.

    If you have an independent life insurance agent on your side, they can take your original application to start your new application.  Your agent knows exactly what went wrong with the first application and can get you a better outcome the second time around.

    When you don’t have knowledgeable support when shopping and during the application process, you might as well be walking around blindfolded.  You are going to waste a ton of your time trying to find the right company, and will probably not get the best policy for your needs. You’re setting yourself up for the possibility of getting declined or getting rated up to a more expensive health class.

    Working with an independent life agent will save you time, money, and a great deal of stress by focusing on the best life insurance carrier for your exact situation.

    The best way to buy is with an independent agent

    Don’t just use an independent agent, but an online independent agent. Your online agent is the best way to get life insurance. This is because they have all the same qualifications and skills as an independent agent but they are usually working with more life insurance companies on a daily basis.  

    Life Insurance Blog uses over 60 companies instead of just a few.  Therefore, you have a much better chance of finding the best policy for you at the lowest rate.

    Another upside, you can work with them online at your own convenience.  You do not have to make an appointment to go and sit down and discuss what you are looking for.  Most online life insurance agents will help you do the entire process online, via email, provide live chat for you to get answers to all your questions, or, if you prefer, you can call them.

    WARNING: What to watch out for

    Never, ever trust an online agent who does not ask you specific questions regarding your health and lifestyle before providing you a quote.  Your premium that you will approved for will be entirely based on these two factors. Without this information, your quote won’t be accurate and you could be applying with a more expensive company.

    A good online independent agent knows they must have information regarding your health and lifestyle to provide you with an accurate quote – period!

    So don’t get concerned if your agent is asking you these questions. Be concerned if they aren’t because your quote will very likely be wrong.

    Also, some agents will automatically give you the healthiest class rating quote in order for you to quickly apply with them. However, when you’re approved at a more expensive rate, they’ll act as if they were just as shocked as you.

    Don’t fall for this tactic.

    Make sure you’re open and honest with your agent about your current and past health so they can shop your case appropriately. Your agent is on your side. At Life Insurance Blog, we’ll provide you all of your options and let you decide on what’s best for you. You won’t get any pressure and if you’d like our recommendations, we’ll provide that as well.

    Can you save buying life insurance direct from the company? 

    No, so let us help you find the best policy available on the market for you. We’ll get you the best coverage at the best price possible.

    Need more information? Visit our Life Insurance 101 learning center

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    Michael Quinn

    Michael is a licensed life insurance agent, expert & owner of Life Insurance Blog. LIB has helped thousands of shoppers understand life insurance and secure affordable coverage.

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