Whenever we consider purchasing life insurance, we should also consider how important this purchase is. After all, your life insurance isn’t for you, it’s for your beneficiaries which are typically surviving loved ones. Lately, more and more insurance companies are offer life insurance products directly to consumers and by doing so, they are commoditizing a very import product. Recently, life insurance companies have decided that they can sell their product just as if it was a computer, hand tool, or overcoat. Let’s be clear on one particular thing, life insurance is not a product or service, life insurance is a promise.
For some consumers, it is very difficult to purchase something as important and personal as life insurance from someone who they haven’t met, spoken with at length, or are just another voice on the other end of the telephone call. Others, however, are completely comfortable with purchasing life insurance direct from the company because it is their intent to circumvent an agent and speed up the process.
One of the types of insurance that is regularly advertised on TV and sold on the phone is Final Expense Insurance. This product is aggressively marketed to seniors because there are so many out there who are likely watching television throughout the day. Insurance companies that specialize in senior insurance products invest millions of dollars every year convincing seniors that they can easily purchase important life insurance from the comfort of their recliner. This is certainly not a bad thing, especially if the prospect needs life insurance; but it is not usually the best way to do business or purchase a promise.
The Drawbacks of Buying Final Expense Insurance Direct
Agents may Not be Licensed
Ordinarily, when you call to purchase final expense insurance directly from the company, you are going to be doing business with someone in a call center. The calls that these folks receive come in and are routed from one person to the next and whoever is not on their phone will generally get the call. Certainly, there is nothing wrong with this but you will not know if you are dealing with a licensed agent who is experienced and reputable. In most states, agents working directly for an insurer are not required to be licensed. Call centers do, however, have a shift manager who is licensed and all representatives on the shift are responsible to the manager.
There is No Savings when You Buy Final Expense Insurance Direct
Most consumers assume that since they are buying directly they are circumventing the middleman. They also assume that since the middleman will not be getting a commission on the sale, the insurance company will reduce your rates because of the savings. This is a false assumption. Although the insurer does not have to pay an independent agent when you buy direct, they still have to pay the person who took your order over the phone. They also typically have to pay for health insurance, employment taxes, and workers comp insurance that they do not have to pay an independent agent.
You should also keep in mind that most call centers have a revolving door when it comes to keeping sales representatives employed so it is unlikely that the agent who built a 10-minute rapport with you is going to be there next year to contact you and complete an annual insurance review. Some people aren’t concerned about this, but they should be. Life events happen to all of us and as a result, there is usually a changed needed with your life insurance.
Cookie-Cutter Policies for Cookie-Cutter Customers
In most cases, insurance companies that will sell final expense insurance direct to the public offer maybe one or two products and they do as little underwriting as possible. In fact, for most direct writers, all of the final expense policies they sell are on a “guaranteed acceptance” basis. This means that they will not take your health into consideration when they underwrite your policy and therefore you will likely be subject to a waiting period for full death benefit coverage and pay much higher rates than insurers who do more complete underwriting.
The Advantages of Buying from an Agent
First, let’s be clear. When we talk about an insurance agent, we are referring to an independent insurance agent, not a company (captured) agent. Independent agents are self-employed and as such, they can represent multiple insurance companies to meet the needs of their clients and prospective clients. All independent agents must be licensed to sell insurance in their home state and every other state they do business in. You can easily check the status of your agent’s license by visiting the Department of Insurance website in your state.
Instant Quotes from Multiple Companies
The insurance companies that market final expense insurance have very similar products but their pricing will always vary according to the prospects age, health, and coverage requirement. Some carriers develop what agents refer to as “sweet spots” which means carrier A will be happy to accept an applicant with COPD, but carrier B may be reluctant and will decline the application. By utilizing the experience and technology that independent agents use every day, your agent will know in advance which carrier is going to offer the lowest rate based on your individual circumstances. They call also get instant quotes from every final expense insurance company they represent by using one application. This alone will save you considerable time and aggravation.
Alternate Choices When Needed
Independent agents want to do business with everyone that contacts them, even if you have multiple serious health problems. The mistake you make by agreeing to “guaranteed acceptance” final expense insurance when you buy direct is eliminated because your independent agent can quote you with alternative products if required:
- Level Benefit Final Expense Insurance – A level benefit policy provides the lowest rates and the full death benefit is available on the first day of coverage. Level Benefit insurance is also the lowest priced final expense insurance.
- Graded Benefit Final Expense Insurance – A graded benefit policy is the next alternative policy for applicants who do not medically qualify for level benefit life insurance. It costs a little more and the death benefit is payable as a percentage of the face amount over the first three years.
- Guaranteed Issue (Guaranteed Acceptance) – A guaranteed issue final expense policy should be considered a policy of last resort. This coverage is applicable when you cannot qualify for a level benefit or graded benefit final expense policy. Since the guaranteed issue policy does not take your health into consideration, virtually anyone who is alive and is 50 to 85 can buy life insurance coverage. These policies are more expensive and there is generally a two or three-year waiting period before the insurer will pay the full death benefit if death is the result of natural causes.
The Choice to Buy Final Expense Insurance is Yours – Choose Wisely
Our intent here is not to convince you whether buying final expense insurance direct is a good decision or a bad decision, it is only to provide you with the information so that you can decide what is best for you and your family.