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Independent Life Insurance Brokers vs. Proprietary Agents

Why Many Life Insurance Choices Are Favorable To One with a Bundled Discount

Why Many Life Insurance Choices Are Favorable To One with a Bundled Discount

This post will likely generate some criticism, but my experience includes sales on both sides of the life insurance fence. There have been a lot of ads lately talking about how you can obtain a “bundled discount” if you purchase multiple lines of insurance through the same insurance company. Let's examine this claim closer to see if the discount is worth the convenience of a one-stop shop.

A disclaimer here is that Fifth Street Financial Group is a corporate and personal life insurance BROKER (as well as employee health benefits broker). We represent 25+ of the largest “A rated” carriers, but I'll try and keep the slant out and make this analysis as unbiased as possible.

Bundled Pricing-“Good” Neighbor and “Good” Hands

Spoke to an ex-“Good” agent who claimed that “Good gives such a deep discount on the three policies (auto/home/life) that an individual can basically buy a $300K basic life policy with the savings.”

Can he please be a bit more vague? What kind of policy? More information please.

There are many variables that determine cost of life insurance (age, gender, state of residence, whether you smoke, current health, type of policy, face amount (death benefit) health history, etc. It is easy to make general statements, but we need to know specifics to compare apples to apples.

For all we know, proprietary agents may be trained to be ambiguous (I cannot verify this statement). This strategy is misleading as the general public does not know to ask qualifying questions.

Next time you’re watching TV and one of those ads appears where it offers $500k death benefit for as little as $20/month, squint at the print at the bottom of the screen. I’ll bet it reads something like this, “Actual rates and availability are based on underwriting approval. Do you think? This quote is based on Guaranteed Level Term product and uses female, age 30, preferred health rating, 10 year term insurance.” Firstly, a preferred health rating is difficult to obtain. Secondly, if you are a female, ideal height/weight, and have NO health challenges or history, you may fall into this category. Let's be truthful. Most of us hit the Ben & Jerry’s on occasion and do not workout as much as we would like to. Lastly, 10 year term? Most of us need a life insurance policy lasting much longer than 10 years. Assuming you do not have a magnifying glass, this type of advertising MISLEADS the general public.

SCORE-Independent Broker 1, Proprietary agent 0

The search continued to the other “Good” agency for a TERM life quote for $1 million online. Here is what we discovered:

Challenges right out of the gate. I am almost 47, and tried pricing a 30 year Term policy. Not an option! The longest term policy offered was a 20 year Term. My children are ages 6 & 9. That added coverage is intended to last into my late 70s. I'd have to be 46 or younger to get a 30 year policy! A Universal Life quote was attempted as well, but was told I had to speak to an agent to get the info I needed. The lack of a long term policy and the hassle factor of needing to speak to a salesperson before I was given my request, was frustrating.

SCORE-Independent Broker 2, Proprietary agent 0

Big Insurance Companies- Next, we found that life insurance discounts on Auto and Homeowners through big carriers is nominal, around 5% on the Homeowners policy only. There is a large discount to the homeowner (20%) IF the Auto is written, and a smaller discount to the Homeowner if Life Insurance is written. 25% or even 30% off the homeowner's policy only (arguably the smallest premium of the three) sounds good, but is a small overall percentage of the total dollars paid for the three policies.

Numbers

Let’s examine some ACTUAL life insurance quotes. We compared 'Good" Proprietary company rates some to that of other large life carriers. BTW, these numbers can be confirmed by calling simply calling us at Fifth Street Financial Group.

30 Year Term Policy, Male, Non-Tobacco, $1Million Face Amount, age 46, Annual Premium Payment

Health Rating "Good Company' Major Insurer $ Difference % Difference 30 Year Savings Preferred Best $2,440 $1,905 $535 28% $16,050 Super Preferred $2,990 $2,415 $575 24% $17,250 Preferred $3,680 $3,165 $515 16% $15,450 Standard $5,070 $4,025 $1,045 26% $31,350

* Quotes were run 11/4/11 and all %s are rounded. Health ratings are partially determined by taking a complimentary health exam.

NOT IN “GOOD” HANDS AFTER ALL! Please look at the premium difference if added after 30 years. The additional cost of not doing your homework is substantial!

SCORE-Independent Broker 3, Proprietary agent 0

Proprietary insurance companies are fine choice for those willing to pay a premium for convenience and one-stop shopping. Add that premium over twenty or thirty years and it adds up to a staggering amount.

To be fair, let’s give these firms a half point for convenience.

SCORE-Independent Broker 3, Proprietary agent 1/2

Bottom Line

Not having all the info your need to make an informed decision will cost you more than a little money in the long haul. Scrutinize those generalized statements that offer unbelievable rates. You may fall into that elite health category, but more likely not. Even if you do, you can still save by comparing multiple insurance companies. Do yourself a favor and get a competitive quote from an independent life insurance broker if you are considering life insurance, either for yourself or the executives of your company. You will get unbiased service and they will be able to tailor a policy to meet your needs and budget.

The opinions expressed here are the blogger's and not necessarily those of the local editor's or anyone affiliated with Patch.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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