What Your Agent Is Not Informing You

Sometimes, the most important part of a conversation is what’s not said. Information can be omitted by accident or on purpose. Asking the right questions can help you uncover this missing information, especially when you’re shopping for life insurance. Here are five things that your life insurance agent probably isn’t telling you.

Agent Works for the Life Insurance Company, Not You - An agent is someone who is authorized to act on behalf of a principal (someone else). An agent is required to represent the interests of their principal. In other words, under contract law, an insurance agent is an agent of the life insurance company. This means that they are not legally your agent. This is an important distinction. The majority of life insurance agents are professionals who will do their best for their clients. However their primary duty is to the insurance company.

They May Be Limited in the Products They Sell - There are two types of life insurance agents: Captive agents represent one life insurance company and Independent life insurance agents represent multiple companies. If you are working with a captive life insurance agent, you will receive proposals for only their company’s products. An independent life insurance agent should provide proposals from more than one life insurance company. It’s okay to work with a captive life insurance agent, as long as you’ve taken the time to determine that this is the right company for you.

The Insurance Agent’s Commission Will Vary by Product - Life insurance agents are compensated by commissions, which are paid as a percentage of the premium for your policy.
An agent’s commission will be different for each type of life insurance policy. Because of that, a life insurance agent might steer you toward a policy that will pay them a higher commission. While you can ask about the commission that a life insurance agent will make, the response may not be helpful. The commission does not always impact which policy is the best choice.

Premiums Are Not Always Guaranteed - The premiums on a life insurance policy may or may not be guaranteed. Without a guarantee, you could end up paying more than anticipated. 

1: Life insurance products with guaranteed premiums are:
- Guaranteed level premium term life insurance
- Whole life insurance
- Guaranteed universal life insurance

2: Life insurance products with non-guaranteed premiums include:
- Universal life insurance
- Indexed life insurance
- Variable life insurance

The premiums for these non-guaranteed policies are based upon projected, non-guaranteed assumptions, such as projected gains in cash value. If the policy does not meet these projections, you may need to pay more in premiums in order to keep the policy in force. Life insurance companies usually do not inform their clients that they will need to increase their premiums to continue their policy as planned. This is why it’s important to order an in-force life insurance illustration every two to three years.

A Life Insurance Policy Is Not An Investment - Many life insurance agents will bury the fact that you are purchasing a life insurance policy. They will focus on the cash value component, and that you can use life insurance to fund your retirement, among other scenarios. Indeed, a cash value life insurance policy can be used in certain situations to help supplement other investment goals. But buying life insurance for these situations only makes sense when there is also an actual need for life insurance, because on all life insurance policies there is a cost to you for the insurance itself.

Getting What You Need - Being an informed consumer will help you find out what your life insurance agent may not be telling you. Your life insurance agent should be willing to answer any questions and to provide that information in writing. You can help yourself by being sure that you understand your life insurance needs, the goal in buying the product, and the product that is being offered. If you don’t understand something, then you should not buy it.