Can I save buying life insurance direct from a life insurance company?

Can I save buying life insurance direct from a life insurance company?

I don’t want to waste too much of your time, so here’s the simple answer to your question: No, you cannot save money by buying term life insurance directly from a life insurance company. Regardless of where you buy that life insurer’s policy from - an agent, an online broker or directly from the life insurer - you will go through the same qualification process and ultimately be offered the same rate. Insurance policies aren’t like consumer products, where the exact same model may be sold for a different price at two different places.

Why are life insurance policy prices the same regardless of where you buy? It has to do with how life insurance is regulated. Not only will you not save money by buying directly from a life insurer, but not looking at your policy options using an independent agent could actually end up costing you money.

Regulated rates: why you won’t save money on term life insurance by buying direct

Think of the worst, most complicated Excel spreadsheet you’ve ever seen. This is basically what every life insurance company has to create and submit to state governments. These spreadsheets – called "rate tables" – tell the government how a life insurance company is going to charge their customers based on specific health conditions and lifestyle risks.

A number of factors go into deciding these prices. First and foremost, insurers look at the actual risk of insuring someone based on health and lifestyle. A cancer survivor, for example, is more of a risk to insure than someone with no history of cancer. A skydiver who smokes a pack a day is riskier to insure than a vegan yoga instructor.

A small percentage of a life insurance policy’s price also goes towards marketing, aforementioned agent commissions, company overhead, and pure profit. This is basically the same as any other product – for example, your smartphone. That phone doesn’t actually cost $700 to produce, but once you add in everything else that goes into getting it into your jeans pocket or purse, it comes pretty close.

Unlike that smartphone, however, no one can give you a Black Friday deal on your life insurance policy. In order to operate legally, life insurance agents, online quoting engines, and the insurer have to offer you a policy based on the rate table they filed with your state government. No one-day deals. No special offers. And absolutely no discounts for buying directly from an insurer.

Life insurance companies build the cost of commissions to life insurance agents into their rates, which means you’re paying for those commissions whether you use an agent or not.

2 ways you lose money by buying term life insurance directly from an insurer

1. You’re limited to their policies, which may be more expensive than a competing company

Life insurance premiums are regulated, but that doesn’t mean that they’re all the same. Different life insurance companies offer different rates depending on how they view the risk of various health conditions and lifestyle choices. Some companies, for example, view diabetes more favorably than others. Others may take a stricter look at a family history of cancer. Another might be the best fit for a frequent diver.

If you only look at life insurance quotes from one company, there’s a chance that you could miss out on a better deal from a company that isn’t so strict about your health conditions, family history, or lifestyle. An independent life insurance agent can not only help you shop around, they probably already know the best company for you based on the information you give them.

For a closer look at how top life insurance companies view major health conditions, check our life insurance company reviews.

2. You have no support through the application process

The best part about using a life insurance agent instead of buying direct? Actual support during the life insurance shopping and application process. Applications can take four to eight weeks to get through the insurer’s approval process. If you buy direct, you put in your application and then… wait until you get a response. An agent, on the other hand, can give you updates as things move through the funnel.

And let’s say your application isn’t approved for whatever reason – like you accidentally omitted the fact that you’re a marijuana user when your drug test said otherwise. If you were buying direct, you’d have to start back at square one with another insurer. An independent life insurance agent, on the other hand, can use your first application to kickstart your next application. And because they know exactly what happened with the first application, they can help you get a better outcome in the second round.

Without support through the shopping and application process, you’re flying blind, potentially wasting time on companies that aren’t the best fit for you and who may end up rejecting you or knocking you into a more expensive classification. Working with an agent saves you time and money by focusing in on the best company for your specific situation.

Why an online independent agent is the best way to buy life insurance

We’ve just spent a good chunk of time talking about why independent agents are way better than buying direct, but I’m about to throw an extra wrinkle into it. The best way to buy life insurance isn’t just through an independent agent, but an online independent agent.

Online independent agents have all the benefits of independent agents, except supercharged. They usually work with more life insurance companies – often 10 or more, instead of a handful your in-person agent might work with – meaning you have a way better chance of finding the best deal.

Plus, you can work with online independent agents on your own time. No need to make an appointment (or multiple appointments). With most online agents, you do almost the entire process online, asking for advice through a live chat window or on the phone if you need it.

There’s just one thing you need to watch out for: don’t trust an online agent that doesn’t ask you specific health and lifestyle questions before giving you a quote. As you read above, your premium is almost entirely based on your health and lifestyle. No one – not an online agent or an in-person agent – can give you an accurate quote unless they ask you these questions.

Luckily, answering these questions is a quick process. Want proof? Check out our life insurance quoting engine today to see how fast you can get the most accurate online life insurance quotes available.