After going through the questions and answers surrounding which life insurance plan to quote and purchase, many clients inevitably get to the question, “And how are you paid”. It’s sometimes delivered sheepishly or with a hint of suspicion but we feel it’s important to give you the full detail. We really do want this to be a relationship and part of that relationship is an understanding of how life insurance agents get paid.
The short answer is that we (being independent life insurance agents) get a commission when a policy goes into effect. The main take away for you as the purchaser of term insurance is that your rate will be absolutely identical whether you go through us, another agent/broker, or directly with the carrier. This is very important and usually leads to the question of how we get paid in the first place. There is no fee for our service. PERIOD. Think of us as travel agents. We do get a commission from the carrier when a person pays for his/her approved policy but it doesn’t affect the rate they will pay. If you go direct to the carrier, you will pay the exact same rate. Some agents work directly for a carrier which means they are not independent. They can only really show you that carrier’s insurance products. We are independent which allows us to shop nearly the entire market on your behalf.
Another important point which hopefully sheds light on where our interest lie is how much that commission is. The commission is pretty comparable from carrier to carrier so there’s no real advantage to going one direction or another. The commission does vary with the size of the policy and is based on the amount of premium. Life insurance commission tend to be paid quite a bit for the first year and then very little if any on the remaining years. Let’s get back to the “based on amount of premium” above. You’ll notice that we’re big fans of term life insurance (with dozens of pages across this website to prove it). One of the reasons we’re big fans (and also customers without sounding like a popular toupee commercial) is that it is so affordable. We think it makes the most sense financially for most life insurance needs. We could probably make a lot more commission in whole life insurance or other variations of that product but we don’t feel they make the most sense for our clients, not to mention ourselves. We’re a little leery of life insurance agents pitching and pushing other types of insurance that can be 10 times more expensive than term insurance available right here on this site. Maybe, there’s an advantage but I would need to be convinced that the advantage is for the client (and not the broker and/or carrier).
So, the net take away is that we would probably be selling other types of life insurance if our primary motive was to maximize commission. Term life can be extremely inexpensive which is why it makes so much sense and also why some agents avoid it. Not us. What exactly do we do for the commission we earn? We’re glad you asked.
We help our clients through the entire life cycle of the term policy. First, we provide multiple strong carriers up front to quote against each other so that you can find the best rate. We can get your application started with a 10 minute phone call with one of our agents. We track the process through underwriting to make sure your application moves through smoothly. We assist with the entire issuing and receipt process to make sure your policy does not lapse before it’s in place. Finally, we continue to be a point of contact throughout the life of the policy to investigate options, rates, and changes that may benefit you as the policy holder. You are essentially receiving a trusted third party at no additional cost to you. It’s nice to have someone on your side when dealing with the large life insurance companies and the many different options available on the term insurance market.
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