The insurance industry and the life insurance agent have a bad rap. As usual, it’s the poor behavior of a few that makes the rest of us look bad. So, how can you, as a consumer, make sure you’ve got one of the good apples? There’s no simple, fool-proof answer, but if you see any of these six signs, you should definitely start asking more questions.
1. The Interest Rate Is too High
All types of permanent life insurance, index, whole, variable, or whatever else, are based on an interest rate. That rate can come from any number of places. In each case, there is a maximum interest rate the agent is allowed to show you. We’ve noticed that agents often show the max when they’re trying to pull one over on their client. Ask to see something a half point or a full point lower and notice what happens to the deal you’re being offered.
2. The Insurance Company’s Rating Is Poor
It is ok if you don’t recognize the name of the insurance carrier. Some smaller, lesser-known companies do excellent work. Of course, others don’t. Always do your homework on a carrier—check its ratings, including financials, and find out what kind of reputation it has among people familiar with the industry. Never rely only on a company’s employees for information. Note that mutual companies have relatively high ratings because they are not subject to the same scrutiny as stock companies—you’ll have to mentally adjust for that and, again, do your homework.
3. The Client Pitches Only One Carrier
You have a whole world of options, so why is the agent only showing you one of them? Maybe the life insurance agent is familiar with your situation and knows this carrier is really the best one for you—or maybe you’re being steered towards the agent’s employer. It’s your responsibility to ask why the one option you’re being shown is the best. If you’re not satisfied that it is, find a different agent. Many advisers do work for an insurance carrier and have an incentive to steer you towards that one, but they are free to sell you something different. The choice is yours, and an honest life insurance agent will support you in making your choice freely.
4. The Agent Does Not Show You an Illustration
The life insurance agent should show you a full illustration—all the numbers that apply to the offer you’re getting, the premium, the cash value, the death benefit, and so on. If the illustration is missing, or if you’re only shown bits and pieces of it, there’s no way you can tell if you’re getting a good deal or not. There might be a reason you’re being kept in the dark. Ask to see the full illustration. If you don’t understand what you see, ask to have it explained, either by your life insurance advisor or by someone else. Don’t take anyone’s word for it that an offer is good or bad—people have agendas. Ask for the information you need to make that judgment yourself.
5. The Agent Recommends Only Term Life Insurance
Term absolutely has a place in the market. It’s a popular option. There are even people, like Dave Ramsey and Susie Orman, who say it’s the only option. They may have their reasons, but no advice is applicable in every single instance. For example, Dave Ramsey in his spirited advice is mostly talking to people who have significant debt. Your situation may be different. In any case, you should decide for yourself what kind of policy is right for you—the agent’s role is to clearly explain all your options. Someone who shows you only those options they like is not doing you any favors.
6. Showing preferred best rates for all clients.
A life insurance agent can often earn business because they quote the best possible rates, but only ten percent of the population actually qualifies for those rates. You need to know what your policy will look like if you don’t end up in that ten percent. If the agent doesn’t tell you, ask.
The Big Picture
In general, if your life insurance agent is steering you towards something or giving you a too-rosy picture, you might be headed towards a lot of frustration. You need someone who will give you the information you need to make your own choice, even if the process seems a little harder or a little less optimistic to begin with.
The bottom line is that you have to ask questions. If your agent readily answers your questions clearly and completely, then maybe you’ve found someone you can work comfortably with for a long time.