As you may know, there are two main types of life insurance policies. Term and whole life.
Which one makes the most sense for you really depends on a variety of circumstances and that is something I would be happy to discuss with you personally.
This is more of a general overview on how to make sure you are getting the very best price on your policy and how to avoid potentially getting ripped off.
The first thing to know about life insurance is that there are many different carriers all offering the exact same product. Company A is offering a million dollar 20 year term policy at $50 a month and Company B is offering you a million dollar 20 year term policy at $52 a month. Is there any reason to pay more for Company B over A if they are offering the exact same thing? No.
Life insurance is not like health insurance where you may need to consider which doctors or hospitals are in certain networks and it's not like auto insurance where your actually dealing with customer service from time to time.
Generally speaking, you're only dealing with a life insurance company twice. Once when the policy is bought, and once when the covered individual is dead. As a result, just go with whoever is cheapest.
Well who is the cheapest? Let me first tell you who is not the cheapest. 99.9% of the time, if you buy life insurance from your auto insurance carrier, you will not be getting the best rate.
Let me repeat that. While its totally fine as a matter of convenience, to add life insurance to your auto policy, you will be spending significantly more than you have to. Auto insurance companies do not shop around from the hundreds of life insurance carriers that offer life insurance. They only offer their brand name life insurance.
Similarly, if you call up any life insurance company directly as opposed to using an independent broker like myself-they will only be offering their particular product. What are the chances that out of all the different life insurance companies, you happened to choose the one that is offering the very lowest rate? It's obviously very unlikely.
Note that not all brokers have access to the very best rates. They may only contract with one or two different companies so when they tell you company A is offering the best rates, that may be true out of the few companies they offer but not out of all the options that are out there. If your broker or agent isn't able or willing to send you a breakdown with a list of at least 7 different carriers and their quotes, they probably don't contract with that many companies and can't truly offer you the best price.
Now, there are generally two ways to go through the application process for life insurance.
Option # 1 is to go through full underwriting. That usually entails having a blood and urine sample taken as well as a interview. The underwriter may have follow up questions for both you and your doctor. The entire process is usually slow and annoying and can take over a month. However, at the end-assuming your results come back nice and healthy, you will be getting a very good rate.
Option # 2 is to skip the whole hassle of underwriting. You will have to answer just a few basic health questions upon application. There is no blood work or follow up discussions with your doctor. You simply submit your application and you are instantly approved or denied. Issue being is that you will end up paying more compared to if you had gone with option 1 and your results came back healthy.
Which option do I recommend? Well it depends who you are.
Let's say you're young and healthy and don't have any pre-existing conditions whatsoever, and your confident that you will stick with and complete the process and hassle of full underwriting even though it may take several weeks, you will be better off going with option # 1. However, if you're the type to forget or get lazy about it and are never going to actually follow through with all the underwriting requirements, go with option # 2 and get yourself immediately approved. If at some point later, you decide that you want to try to save some money and are now willing to put in the effort-nothing is stopping you from doing another application with full underwriting. Once you are approved at a lower rate, cancel the policy you had gotten instantly approved on which is more expensive.
What if you are someone who is older or has some health-related issues-In this scenario I would recommend 1st doing an instant approval application-Once that is approved, you can start the process of seeing if you can possibly get a better rate under full underwriting. The reason why you don't want to go with the full underwriting 1st is if your application results in a denial or an unfavorable rating-that goes on your record. If you revert back to the easer underwriting policy, you likely will get denied on that too once your record is stained. So, get yourself in the door with the instant easy approval, and then go for the full underwriting afterwards.
Now you will almost never hear this type of advice from most agents and brokers that you speak to. And here is why.
-Many do not have access to both fully underwritten and instant approval carriers. They sometimes have only one or the other.
-Even if they have fully underwritten products, they want to ensure they get their commission, so they rather get you instantly approved at a higher premium in order to ensure they get paid as opposed to you starting the underwriting process, getting frustrated or lazy with it and never following through. And of course, they would rather sell you a more expensive policy as they make more money on it as opposed to you getting a really great rate by going through full underwriting.
-Most brokers and agents get paid at least a 9-month advance. That means the life insurance company is paying the broker an upfront commission assuming that you're going to keep the life insurance for at least 9 months. If you were to cancel your instantly approved life insurance policy once you went to full underwriting and got a better rate, the broker is going to have to pay back to the life insurance company that advance. That is a tremendous hassle and often can result in a broker's contract being terminated if he owes too much money back the carrier. As a result, most brokers prefer that you just buy one policy and never cancel. But that often is not the best option for you.
Just to reiterate, it usually makes sense to just get a policy instantly approved and afterwards try to beat the rate by going through full underwriting and just canceling afterwards.
You should also know that brokers are often given incentives like free vacations or cash bonuses if they hit certain quotas with certain carriers. They therefore may be motivated to push a certain company your way even though it may not be the best rate.
That is why it is so important to find a life insurance broker that you truly can trust to help you make the best choice regarding your life insurance
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