3 Advantages Of Buying Life Insurance From A Broker

Woman using a computerLife insurance ownership has dropped sharply over the past few decades, reaching a new all-time low. According to research and consulting firm LIMRA, 30% of U.S. households currently have no life insurance at all. However, a full 50% of U.S. households admit they do need more life insurance.

So why aren’t more people buying?

To find the answer, LIMRA administered a life insurance “IQ test” to 4,000 Americans. The results, published in January of 2013 by LifeHealthPro.com, showed that the majority (55%) got fewer than 5 out of 10 questions right. Jennifer Douglas, LIMRA’s associate research director for strategic development and research, noted that consumers believe life insurance is “too confusing.”

The best way to make life insurance less confusing is to work with a broker to make the purchase. Brokerages have three key advantages over individual insurance agents (called “captive agents” in the business). Here’s how they can help you:

  1. Brokers have access to multiple carriers. Being a broker means working with several different life insurance providers (called “carriers”). Many local agents are contracted with one specific carrier, usually a large national provider such as State Farm, Allstate, or Farmers. That agent would only be able to give you a quote from the provider he or she is contracted with. But what if you want a second opinion? You’d have to visit or call agents who represent the other carriers you want rate quotes from. Most consumers don’t have that kind of time.
  2. Brokers make price comparisons easy. In addition to seeing quotes from multiple carriers, brokers make it easy to compare prices. If you’re not sure whether you want $250,000 or $500,000 of coverage, for example, you can run a new quote on a brokerage website with one click. If you’re doing this the old-fashioned way, you’d have to get on the phone with agents for each carrier to find out how your changes affect your rate quote. Even if you’re using individual carrier websites to price a policy, this is a lot of bookmarking and clicking. Again, most consumers don’t have that kind of time or patience.
  3. Brokers offer impartial advice. Because they work with multiple carriers, they’re not going to push you toward one particular vendor. They can step back and look at each one objectively to help you make a clear and focused decision. Experienced brokerage agents can also offer you extra information on things like approval times and the ease of filing a claim. They can also help you pinpoint the right carrier to apply with if you have a particular medical condition that might make approval tricky. They know, at a glance, which of their carriers is most likely to approve a type 1 diabetic, for example. If you have diabetes, multiple sclerosis, breast cancer, cardiomyopathy, arthritis, or another chronic health condition that requires high-risk life insurance, a brokerage agent’s specialized knowledge can cut down on the chance of you being denied coverage. Brokers can also steer you toward guaranteed issue policies, if your health is such that you won’t pass the health screening exam required for a standard policy.

According to LIMRA, in 1960, 72% of families owned individual life insurance policies. By 2010, that number had dropped to 42%. That percentage might be higher if more families worked with brokers, shortening the time between their decision to buy and policy approval.

Jenni Wiltz blogs about life insurance and financial planning for WholesaleInsurance.net.

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