Secret #1: Don’t spend too much time on a quote.
don't be fooled by the low price quotes you get online –. They don’t apply to you unless you're extremely healthy. Statistically only 10% of people who apply actually get the lowest priced policy. The premium you end up paying has nothing to do with the initial quote you get online or from an agent. it's amazing to me how often I see people getting duped by an agent who quotes company X at a lower price than another agent.
policies are the same price no matter who you buy from! One agent or website quoting a lower premium means nothing. Prices for any given policy is based on your age and health. There are a few exceptions to this but that's beyond the breadth of this article.
Most companies have 10-20 different health/price ratings and no agent or website can assure you the quote they give you is accurate. you've to apply, do a health check. Then go through underwriting (meaning you complete a mini-exam with a nurse in your home and then the company checks you doctor records and reviews and ‘rates’. Your health) to get the real price of the policy. Remember that a health rating also factors in your family history, driving record. The type of occupation you've. Only use quotes to help narrow down your choices to the top companies. You may want to consider a no load or low policy. The more that you save on commisions the more money builds up in your policy. You can even buy term insurance no load. Save a lot on premiums. you'll not get the help of an agent, which may be worth something if they're very good.
The most important factor determining price is matching your particular health history with the company best suited for that niche. For instance company X might be best for smokers, company Y for cancer survivors, Company Z for people with high blood pressure, etc.
Secret #2: Ignore the hype on term versus cash value permanent insurance.
You can go crazy reading what everyone has to say on buying term insurance versus a whole or universal life policy. Big name websites give advice that I think borders on fraudulent. Simply put there is NO simple answer on whether you should buy permanent cash value policies or term insurance.
But I do think there is a simple rule of thumb –. Buy term for your temporary insurance needs and cash value insurance for your permanent needs. I've read in various journals and run mathematical equations myself which basically show that if you've a need for insurance beyond 20 years that you should consider some amount of permanent insurance. This is due to the tax advantage of the growth of the cash value within in a permanent policy. I'm divorced and have taken care of my children should I die. I probably no longer need as much insurance as I now have. I've earned a great return on my policies and have paid no taxes. I no longer pay the premiums, because there is so much cash in the policies. I let the policies pay themselves. I'd not call most a good investment. Because I bought my policies correctly. Paid almost no sales commisions my policies are probably my best investments. I no longer own them. When I die my beneficiaries will get the money both tax free. Estate tax free.
Since most people have short term needs like a mortgage or kids at home they should get some term. Additionally most people want some in place for their whole life to pay for burial, help with unpaid medical bills and estate taxes and so a permanent policy should be purchased along with the term policy.
Secret #3: Consider applying with two companies at once.
companies really don’t like this “trick”. Because it gives them competition and increases their underwriting costs.
Secret #4: Avoid captive agents.
Look for a agent who represents at least fifty companies and ask them for a multi company quote showing the best prices side by side. Some people try to cut the agent out and just apply online. Just remember that you don’t save any money that way because the commisions normally earned by the agent are just kept by the insurance company or the website insurance company without having your premium lowered.
Plus a good agent can help you manoeuvre through some of the complexities of filling out the application, setting up your beneficiaries, avoiding mistakes on selecting who should be the owner, the best way to pay your premium. Also will be there to deliver the check and assist your loved ones if the is ever used.
Secret #5: Consider refinancing old life policies.
Most companies won’t tell you but the price you pay on your old policies has probably come down dramatically if you're in good health. In the last few years companies have updated their predictions on how long people will live. Since we're living longer they're reducing their rates rather dramatically. Beware the agent may be doing this to obtain a new commision. Make sure it really makes sense.
I really am amazed at how often we find that our client’s old policies are twice as expensive as a new one. If you need new consider “refinancing”. Your old policies and using the savings on the old policies to pay for the new policy –. That way there is no extra out-of-pocket costs. We like to think of this process as “refinancing your ”. –. Just like you refinance your mortgage.
Secret #6: Realise companies have target niches that constantly change.
One day company ‘X’. Is giving good rates to people who are a little overweight and the next month they're super strict. Company ‘Y’. Might be lenient on people with diabetes because they don’t have many diabetics on the books –. Meaning they'll give good rates to diabetics. At the same time company ‘W’. Might be very strict on diabetics because they're insuring lots of diabetics and are afraid they've too big of a risk in that area –. Meaning they'll give a bad rate to new diabetics who apply.
Unfortunately when you're applying a company won't tell you, “Hey, we just raised our rates in diabetics.”. they'll just happily take your money if you weren't smart enough to shop around. This is the number one area a smart agent can come in handy. Since a good multi-company agent is constantly applying with multiple companies he or she'll have a good handle on who's currently the most lenient on underwriting for you particular situation. The problem is that this is hard work and many agents are either too busy or not set up to efficiently shop around directly to different underwriters and see who'd make you the best offer. This is a lot harder than just running you a quote online.
Secret #7: Don’t forget customer service.
Most people shopping for insurance focus on companies with the lowest price and the best financial rating. Unfortunately I know of some A+ rated companies with low rates who I'd not touch with a ten foot pole simply because it’s easier to give birth to a porcupine backwards then it's to get customer service from them.
Before I understood this I used a company that gave a client a great rate but 2 years later the client called me and said, “I've mailed in all my payments on time but just got a notice saying my policy lapsed.”. It turned out the company had been making lots of back office mistakes and had lost the premium payment!
We were able to fix it because we caught the problem so early. But if the client happened to have died during the short period the policy had lapsed, his family might've had a hard time proving that the premium had been paid on time and they mightn't have received the money –. A loss of hundreds of thousands of dollars in that case.
Secret #8: Apply 3-6 months ahead of the time you need the insurance if possible.
Don’t be in a hurry to get a policy if you already have some coverage in force. But go ahead and apply right away knowing that you might need months to shop around if the first company doesn't give you a good rate. Even though the industry is getting more automated your application will still often be held up for weeks or months while the insurance company waits on your doctor’s office to mail them a copy of you medical records.
If you're in a hurry and buy a quickie ‘no-underwriting’. Policy without going through the full health checks and underwriting that a mainstream company requires, you'll end up paying 20%-50% more because the insurance company will automatically charge you higher rates because they don’t know whether you're healthy or about to die the next day.
Secret #9: Avoid buying extra through work if you're healthy.
I'm sure there are exceptions to this “trick”. I've rarely found one. By all means keep the free your employer provides. But if you're healthy and you're paying for supplemental through payroll deduction you're almost certainly paying too much. What's happening is that your ‘overpayments’. Ends up subsidising the unhealthy people in your company who are buying through payroll deduction.
Usually the company has cut a deal with your employer and will waive the required health exam for all employees –. Instead they just average the price for all the employees and offer one or two rates for males or females at any given age. companies know they'll pick up lots of unhealthy clients this way so they jack up the price on everyone so that the healthy people end up overpaying so that the unhealthy employees get a cheaper policy. Also, unlike the guaranteed term policies which we recommend, most you buy through work will get more expensive as you get older.
Also group is generally not portable when you retire or change jobs meaning that when you retire or change jobs you might've to apply all over again even though you'll be older and probably not as healthy and risk being turned down for a policy. If the group plan does allow portability they generally limit your conversion choices and force you to go into expensive cash value plans.
I remember helping someone evaluate his supplemental . He was sure it was a better deal than any policy I could find him. Little did he know that the price of his group plan would go up every year? By the time he retired his premium would've risen to over $10,000/year. I found him a policy for around $1000/year that'd never go up. Also, unlike his old group life policy, he could take the individual policy with him when he changed jobs or retired.
Secret #10: Do a trial application on a COD payment basis.
Only send money with the application if you need the coverage right away. Sending a check with the application is a traditional practice agents used to do –. I think mostly because it got them their commisions faster. If you send money with an application you usually get temporary coverage immediately but if you already have plenty of coverage and are just trying to get better rates ask your agent to do a trial application on a COD basis so you only pay once the policy is approved. If you don't send money. You die before paying for the policy there is no coverage.
Secret #11: Wear your shoes when the nurse measures your height.
When the insurance company sends out the nurse to do your health check try to be as tall as possible if you're overweight? In most states you're allowed to wear shoes and if you're a little overweight your taller height/weight ratio will look a little better to the underwriter who's determining your health rating and policy price. Also do your exam early in the morning with no food in you –. This will make your cholesterol count and various health ratios look the best.
Secret #12: Be careful with extra perks and riders.
Most policies come with options like accidental death benefit, child riders, disability riders, return of premium etc. If you do the math on most of these “extras”. They usually don’t make smart financial sense. companies are out to make money and these riders are usually profitable because they either cover something that rarely happens or they're so stringent that the benefit never gets paid out. Keep things simple and focus mainly on getting a life policy to cover your life without many strings attached. Again a good agent can help you weigh the benefits of the extra riders. But be wary of an agent who tries to tack on every possible extra rider.