Tuesday, April 26, 2022

How is life insurance sold?



 You can buy life insurance either as an "individual" or as part of a "group" plan.

personal policy

When you buy an individual policy, you choose the company, the plan, and the benefits and features that are right for you and your family. You may be able to purchase a policy from the same agent or representative of the company that sold you property and liability insurance for your home, auto or business. And although you won't qualify for any discounts by purchasing your life insurance and other insurance from a single representative, working with a single advisor for all of your insurance needs can make your financial life easier.

life insurance
life insurance

Individual policies are usually sold through insurance agents or brokers. If you purchase a policy through an agent or broker, you will pay a commission, also known as a "load," which is built into the premium rate. For the time spent advising the commission agent or broker on how much and what type of life insurance to buy, facilitating the application process, and any service needed in future years to keep the policy up-to-date compensates. (such as changing the beneficiary designation, arranging a policy loan, or coordinating your financial plans with your attorney and accountant).

There are two other ways to buy individual life insurance. In Connecticut, Massachusetts, and New York, you can buy it from a savings bank. Or you can buy a policy directly from an insurance company or from a fee-only financial advisor -- known as a "no load" or "low load" policy. Although there is no sales commission on these policies, the Company will have charges included in the premium to cover its marketing expenses, application processing expenses and subsequent services. Finding an insurance company that will sell you a no-load policy is not easy; Typing "no load life insurance" on an Internet search engine will take you to an agent or broker in many cases.

group Policy

You can automatically get life insurance from your employer; Many big companies do this. Your employer may also give you the opportunity to purchase additional life insurance under a group policy. And you may be eligible to purchase life insurance under a group policy from a union or trade association or other group (such as a college alumnus association or automobile club).

Compared to buying an individual life insurance policy, there are several advantages of buying life insurance under a group policy:

Group purchases can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are weighted averages by people younger than you.

There is virtually no health qualification to receive group coverage.

Premium payments are usually linked to payroll deductions (for employer-based group coverage) or other payments (e.g., credit card bills), reducing the chance of missing a payment.

Most employer group plans are term insurance, but if you leave that employer your state may require that you be allowed to replace the policy with the same insurance company as whole life insurance that provides group life insurance. does. You will then pay the premium directly to the company and keep the insurance in force. This can be a benefit if you are older, or have experienced deteriorating health, as it gives you the opportunity to qualify for whole life insurance without a medical exam.

credit life insurance

Credit cards and lending institutions may offer life insurance to pay off your outstanding debt in the event of your death. This is generally made available in two ways:

As part of the loan at no additional charge. In this case the cost of life insurance is borne by the lender and included in its interest rate or other finance charges. If you have this type of credit life insurance, you don't need separate life insurance to pay off that debt if you die.

As an option at an additional charge. In this case, you should usually decline the alternative coverage, provided that you have some other life insurance (group or individual) that can be designated to pay off the debt when you die. If you are under 50 years of age and do not have any other insurance that can pay off this loan, consider buying individual life insurance for this purpose as the rates will probably be better. At 50 or older (or younger with health issues), alternative credit life insurance is likely to be cheaper than individual life insurance if you have no other life insurance for this purpose.