- Have you bought life insurance before?
- Do you know about the different kinds of life insurance policies and what they do?
- Do you only need protection for a limited number of years?
- Do you know how much coverage you need?
If you’re under 40, relatively healthy, and you answered “Yes” to each of these questions, you may not need experienced professional help to buy life insurance. You may know exactly what you want. You probably also know that it can be easy to shop and compare some types of life insurance, such as term life insurance policies, online – for example, you can get a term life quote in under a minute from Guardian.
On the other hand, if you answered “No” or “Not sure” to any of the above, it’s probably a good idea to talk with an insurance professional about your life insurance needs.
What’s the difference between a broker and an agent?
If you think life insurance agents and brokers are the same thing, that’s okay; most people don’t know the difference. However, there is a technical distinction: Brokers represent the buyer, and agents represent the insurance company. Some agents are independent agents who represent multiple insurers, and others are captive agents who represent a single company. In any case, the difference between brokers and the two types of agents sounds more meaningful in theory than it is in actual practice:
- Agents and brokers both earn their income from the same source – insurance company commissions.
- They both have a strong incentive to put customer needs first, because their success depends on repeat business and referrals.
- While a broker can theoretically submit your application to any insurer, they tend to work with just a handful of companies – much like independent agents.
- An agent who represents a single provider with a full spectrum of life insurance products can also be a valuable resource, because he or she likely has a deeper understanding of the product portfolio and how to help you through the application process.
In other words, it doesn’t really matter if you go with an agent or broker. If they are knowledgeable and have helped people like you before (see “Tips” below), either type of insurance professional can act as a helpful guide for your needs.
Not unlike accountants or financial professionals, life insurance agents and brokers are licensed professionals with deep training and real-world experience. They know what types of questions to ask, and they are practiced listeners who will learn about your situation, answer your questions, and explain things like:
The difference between term life insurance and permanent life insurance
A term life policy provides coverage for a specific period of time, typically between 10 and 30 years, and there’s no cash value component – it’s designed purely to give your beneficiaries a payout if you die during the term. Permanent life insurance differs from term life insurance because it’s designed to last your entire life, and it includes a cash value component: A portion of your premium dollars can grow in a tax advantaged way1. There are different types of permanent policies – whole and universal life – which calculate cash growth in different ways; the latter also lets you raise and lower premiums as your income varies2.
The different ways you can use life insurance
All life insurance pays a death benefit that can help protect your family’s finances if you pass away. However, the cash value component of a permanent life insurance policy can provide additional benefits you can can use while you’re still alive: you can borrow money against it, use it to pay your premiums, surrender it for cash to live on in retirement, or even use it as an estate planning tool3. It can also be used to help ensure continuity in a small business, by funding a buy-sell agreement in the event of a partner’s death.
Optional provisions to consider
Life insurance companies offer optional riders that can provide added value for an additional cost4. However, it can be hard to know which ones are relevant to your needs unless you talk to an experienced financial professional.
How much coverage you should consider – and for how long
There are useful rules of thumb for estimating your coverage needs, but they’re just that: estimates which don’t take your unique personal situation into account. A financial professional can help you understand your true protection requirements, helping to make sure you only pay for what you need.
Getting coverage if you have medical issues
If you’ve been diagnosed with a medical condition and worry about qualifying, a financial professional may be able to help you find life insurance – especially if your condition is well-managed (for example, Guardian can issue policies to people living with HIV).
There’s a lot to know about buying life insurance. Licensed insurance professionals have the experience that can help you save time and effort by pointing you to the policies and options that are most relevant to your needs. Are there any drawbacks? Insurance professionals earn commissions, which are paid by life insurance companies for each policy they sell. You may be able to save some of that cost by buying directly from an online company; on the other hand, if you’re not sure exactly what to get, you may end up with the wrong policy for your needs, potentially negating any potential savings. Also, many products and riders are not available online, so may be missing some options.
Ask a friend or family member for a referral
Mention to a family member or friend that you’re thinking about getting life insurance and ask if they know someone who can help. Find out how they worked with their financial professional, and if they were satisfied with the end result. A review from someone you know may be best, and because you have a relationship with one of their existing customers, he or she may have an incentive to work even harder on your behalf.
Find out about their credentials
If you’ve narrowed your search down to a few prospects, ask about their credentials before making your choice. Licensed insurance professionals can get additional certifications and training that can be an indicator of specialties. There are also well-known professional associations, such as the National Association of Insurance and Financial Advisors (NAIFA), that require members to follow a strict code of ethics.
There’s one truism many life insurance professionals will tell you: the older you get, the more coverage may cost. So don’t put it off. If you’d like to speak with an insurance professional right now, Guardian can put you in touch with a financial representative who will listen to your needs, tell you about the kinds of life insurance policies that are most relevant, and even provide an insurance quote.
Should I use a life insurance professional?
If you know that you want life insurance, the amount, and for how long, then you could look for life insurance professionals but may find it easier to get insurance quotes online. However, if you have questions about what kind of policy to get, how much, or any other issue, then you should consider speaking with an insurance professional.
How do I find a life insurance professional?
One way to find a life insurance professional in your area is by asking for a referral from a friend or family member who had a good experience getting coverage.
How are insurance professionals paid?
Brokers earn commissions that are paid by the insurance companies that issue each policy. Agents also rely on commissions, but their companies may provide a base salary as well. Consider asking the insurance professional how he/she is paid.