Buying life insurance is no small feat. It’s an important part of protecting your family and your finances, and you might have the same insurance policy for decades. It can be daunting.
Luckily, you don’t have to go it alone. It’s possible to go through the entire research and application process without talking to anyone (or, at least, keeping the conversation to a minimum). But getting the help of an insurance agent or broker, whether it’s online with PolicyGenius or through a local State Farm agent, can be helpful even in today’s digital age.
What exactly can an insurance agent or broker help you with, and what do you need to know before choosing one? Read on to find out.
What does an insurance agent or broker do?
You don’t need a travel agent to plan your vacation anymore, so why exactly do you still need an insurance agent?
First things first: What’s the difference between an insurance agent and an insurance broker?
An insurance agent sells insurance on the behalf of an insurance company, or several companies (more on that in a bit). They work with insurance companies and specific products and sell them to customers.
So what is an insurance broker? Brokers like PolicyGenius go about a sale from the other direction – we work with customers, get your application, and submit it to insurers to get you covered. Brokers aren’t beholden to any single insurer and work with a wide variety of insurers.
It may seem like you can go through a lot of the life insurance shopping process on your own – and you certainly can – but there are times when an agent or broker can come in handy and make the whole thing much smoother.
Provide advice on policies and needs
Do you need a term life insurance policy, or a whole life insurance policy? How much coverage do you need? How long should it last? Do you need any riders to tailor your policy to meet your needs? Are you overinsured?
These are all questions you can find answers to with a little digging. But they’re also questions an agent can help give you guidance on. An experienced life insurance agent or broker can tell you that a basic term life insurance policy works for most people, but applicants with a lot of assets or complex financial needs may benefit from the cash value component of a whole life policy.
An agent can let you know that laddering multiple policies can save you nearly 50% on your life insurance needs over 30 years.
They can tell you that, for the most part, child riders on policies are unnecessary.
Buying life insurance isn’t necessarily complicated, but you want to make sure you’re buying the right policy. You don’t want to be 15 years into your policy and realize that it wasn’t the right choice. An agent can help you avoid that with the proper planning and assessment of needs.
Plus, they can answer any other questions you have about applying, like whether or not paying your premiums monthly or annually is the best course of action.
Shop around for the best insurance rates
Did you know that not all life insurers are created equal? Some life insurance companies offer better rates to millennials than others; some companies are more lenient toward marijuana smokers.
Applicants also need to take health history into account. During the underwriting process, insurers look at your current health and health history and see how risky you are to insure. This is what determines the cost of your life insurance premiums. If your desired insurer is quoting high rates because of a past heart attack, an agent or broker will know which insurers are more willing to work with you to offer a better rate.
It would be difficult for an applicant to learn about insurer strengths and weaknesses on their own, and it would be time-consuming to re-apply to every insurer looking for the best rates. However with a broker like PolicyGenius, you complete your application once and we can shop it around to dozens of companies for you. Choosing to work with an agent or broker saves time and hassle.
Tips on using an insurance agent or broker
As you can see, there are a lot of benefits to applying for life insurance with an agent or broker. But before you do, there are a few details you should know about choosing the right one for you.
Captive vs independent insurance agents
As mentioned above, there are two types of insurance agents: those who work with a single insurance company, and those who work with multiple companies. These are called captive agents and independent agents, respectively.
Captive agents can get the job done, but an independent life insurance agent is the best option for someone who wants to have their policy shopped around. Because a captive agent works with only one insurance company, they can’t bring your application to other companies to get you a better rate.
You won’t have this issue with a life insurance broker, since they work with multiple companies, but when you’re looking to work with an individual agent, make sure they’re independent so you can be sure you’re getting the policy and premiums that work for you.
Don’t pay extra for an agent or broker
All of these services sound great, don’t they? That must mean they cost you and arm and a leg to get, right?
Nope! None of these benefits – helping you find the right policy, shopping your policy around, and answering your questions – will cost you a penny more than if you just did that all yourself.
That’s because life insurance rates are regulated. A State Farm 30-year, $500,000 policy may be a different price than a similar policy at Mutual of Omaha, but a broker or agent can’t offer you that same State Farm policy at a different rate than you’d get by applying directly through State Farm. There are no discounts, but there also isn’t any upcharging.
Instead of charging extra, insurance agents and brokers typically get paid a commission from the insurer. Captive agents may receive a base salary on top of commissions, but an insurance broker and independent agents are paid on commission, usually equal to the first year of premium payments (or a percentage of that).This means insurers like State Farm and Nationwide make the most money on policies they sell directly—but you don’t get any savings in the process.
If you ever come across an agent or broker who tries to inflate the price of your policy, turn the other way – and consider filing a claim for the violation with your state’s department of insurance.
Whether you’re buying life insurance alone or through an agent or broker, the important thing is to apply so your family is protected. And at PolicyGenius, you don’t have to pick between the two: when you apply for life insurance, you can go through as much of the process as you want on your own, and our licensed experts will always be here if you need help finding the perfect policy.