Why you should use an independent life insurance agent!

Let’s start with an analogy. Suppose you have just made a decision that it is time to buy a car and that, like me, you live in a thriving metropolis of 6000 people. There are two car dealerships, neither of whom have anything close to a large selection, and because we are in the boonies, neither offer what could be called competitive prices. Two hours away is a city of 600,000 with 20 or 30 car dealerships, fiercely competitive, and with every conceivable choice in stock.

Now I am a home town supportive kind of guy, but when it comes to a purchase as big and important as a car, I shop it. I find out the best thing available to me here at home and then I drive two hours and compare. Large inventory and better prices wins every time.

An independent life insurance agent is all about large inventory, more choices and better prices. Their opposite, the captive agent, writes for one company. Companies that have captive agents are historically overpriced and the agent knows that, but can’t steer you to a better price or they’ll starve. If they try to help you out by writing a policy that is better for you through another company, the may lose their job.

We’ve talked about all the different criteria that companies use to underwrite policies, like build, cholesterol level, hypertension, asthma, diabetes, and family history for example. With a captive agent you are stuck with one set of criteria. With an independent life insurance agent you may be working with as much as 40-50 different sets of criteria. In a previous blog I showed how the difference in underwriting between one company and another can easily mean a difference of 60%-70% in price.

A captive agent is generally licensed in one state. If you do business with them and move to another state, you become what’s known in the industry as an orphan. Sometimes you will be called by a new agent in your new state that is also a captive agent. Sometimes you never hear from anyone again. Most independent agents are licensed at least in multiple states. More and more you will find agents that are licensed in all states, so they can literally service your policy wherever you live.

So, why do I harp on the need to use an independent life insurance agent. Life insurance is an important purchase. We are talking about benefits that could affect your family’s future in a huge way. An independent agent can offer life insurance quotes that exactly meet your needs, at prices that cannot be met by captive agents. An independent agent can offer a wider variety of products, whether you are looking for term insurance, universal life or whole life,  with better guarantees and benefits.

The question should really be why “wouldn’t” you use an independent life insurance agent.

Is it REALLY possible to save 70% on your life insurance??

You see it on advertising all the time, but is it true. Whether you are getting life insurance quotes from an indepedent agent or a captive home town agent, you need to know that it is absolutely true that you can save 70% and often much more than that.

There are two reasons that I’ve seen for this oddity. I mean, if a person wants $500,000 of 20 year term insurance, it should be fairly close in price from one company to the next, right? So, the two reasons!!

First is differences in underwriting from one company to another. For example, family history is an underwriting criteria with every company. It can be vary greatly from company to company. Say the policy above is for a 45 year old male in perfect health, whose mother died of cancer at age 59. That $500,000, 20 year term with Reliastar would cost $645 a year because they don’t count family history of cancer against you (heart disease is a different story). With Banner Life the policy would cost $1045 a year because they believe that history is significant enough to bump you two rate classes. Same person, same product, 62% higher premium because of an underwriting guideline.

The other reason for large differences is that a company really isn’t out to sell life insurance. Let’s say the guy above qualifies for the best rate available today because his mother didn’t have cancer. Coincidentally, Banner Life who bombed him for the family history, would give him the best rate available without it at $635 a year. Now if you happen to be swooned by an agent who represent Provident Life and Accident, the same policy will cost $1135 a year. That’s 56% higher and there is no difference in the rate class. The only conclusion I can come to is that Provident doesn’t want to deal with it, so if they have to deal with it, they want to make a lot of money for their trouble.

Yes, 70% is possible. Get a good independent agent and get a good rate.

How important is it to have a home town life insurance agent?

My customers don’t see it as important at all. So, let’s look at the pros and cons of a local versus, say a multi state or even nationally licensed agent.

 With a home town agent you can shake their hand or beat them with a baseball bat, whatever the occasion might call for,  with no driving or flying expense. Right there is where the pros end for the local agent.

 As for the cons! A home town agent serves a comparitively small population and therefore does not do the volume it takes to know the products and the underwriters that will approve the products. Because they don’t know the underwriters and very often don’t have the computer software or staff needed, they tend to be slower at providing life insurance quotes and getting insurance approved.

 A home town agent is less likely to be there when you call with a question, less likely to return a call in a timely manner and (this is very important), less likely to stay in business as the majority of life insurance sales is increasingly done on the internet and with nationally licensed agents.

 A home town agent cannot service your needs if you should happen to move. And lastly, in order to survive, most home town agents either have to become captive agents or diversify to a large number of products. If they are captive they can only represent one company and therefore cannot be objective in providing a product for your situation. If they diversify, they simply cannot be expected to know all the nuances of each particular industry or product .

 In short, it is highly unlikely that you will get a better product, price or service with a home town agent. So, unless you want to shake their hand or beat on them, compare before you buy.