What Motivates Your Life Insurance Agent
Life Insurance is a highly competitive industry, in which the product is sold primarily through sales people. The sales people’s compensation is almost 100% commission driven, and the commission they receive is directly tied to what type of Life Insurance you decide to buy. It is important to take the sales person’s incentives into account when comparing various Life Insurance policies.
Insurance Agents want you to buy high margin Whole Life Insurance policies – up to 80 percent of your first year Whole Life premium is allocated towards compensating the Insurance Agent. In comparison the same agent selling a term policy will receive about 10 percent commission. It is important to remember this information when your Life Insurance Agent is recommending which policy plan is right for you.
While Whole Life Insurance may make sense for some people, most people’s Life Insurance needs will be covered under a Term plan. In the past it was hard to find Term Life Insurance policies that covered more than 10 to 15 years. However today 20-30 year Term policies are now quite common and are easy to find.
Your Life Insurance agent may try to convince you that Whole Life policies are superior because they have an infinite term and can build up tax-free cash value. However what the agent may decline to mention is that when you take into account fees, commissions, and surrender charges the amount of cash value built into a Whole Life policy is usually less than that in alternative tax free vehicles such as IRA’s and 401(k)’s. The proliferation of the latter two plans has made Whole Life policies far less attractive than what they once were.
Regardless of what you decide, take the time to learn about the pros and cons of the various policies by researching online and reviewing the Life Insurance resources at Bills.com.