Insurance World

I admit it. I’m a Letterman fan. When Johnny Carson retired from the late night scene, and Letterman and Leno moved to late night center stage, I channel surfed right over to Dave. And, I’ve been there ever since. I usually fade to black somewhere between the monologue and “Will it Float?” But, when I do manage to stay awake a little longer I really enjoy Dave’s Top Ten. So, I’ve been working on my own Top Ten. My Top Ten isn’t funny. But they could just save you a bunch of money if you’ll take them to heart. These are the Top Ten mistakes I see consumers make every day when considering a life insurance purchase.

Blunder #1 - Taking the cheapest quote at face value…

There is no way to get quality low-cost life insurance, appropriate for your needs, without giving it some serious thought and going through the underwriting process. Just because some agent on the other side of the country emails you a cheap quote does not mean that you will get the quoted premium. These quotes are always based on “best case” underwriting. Less than 10% of applicants qualify for the preferred best underwriting classification these quotes are based on.

Blunder #2 - Asking for a quote from multiple web sites…

A computer generated quote can be a good starting point to your search for cost effective life insurance. And, if you are totally honest about your physical condition, medical history, and hobbies, you may get a pretty good idea of what your premium will end up being. But, if you choose to use one of the dozens of “free quote” services, plan on getting 5 or more phone calls from insurance agents. These services make their money by selling leads. And, you become a lead by keying in your information. Leads generally cost between $10 and $20, whether or not you buy anything. And, the lead companies often sell your information to 5 or more agents. I’ve known clients who have asked for quotes from 2 or 3 sites and gotten 15 or more phone calls.

Blunder #3 - Buying permanent insurance when term is more appropriate…

The fact is that insurance agents can usually make more money by selling you a whole life or universal life product than a simple term policy. “If” these products are the right products for your needs - ok. But, often they simply are a bad fit. It all depends on why you are buying life insurance and how long you expect to need it. An insurance agent’s job is to identify the right insurance product, and get you the best possible value. If you suspect that your agent is more interested in making money than helping you, fire him or her. And, hire someone you can trust. One more thing, if some slick operator does manage to twist your arm. You always have 10 days, after you receive the policy, to cancel for any reason. The 10 day “free look” is the law.

Blunder #4 - Working with a captive agent…

Competition drives down prices. It’s a fact. But, many large insurance companies hire “captive” agents. These agents can only sell their employer’s products. So, when you ask a captive agent to give you a quote you get a quote from their company. Independent agents don’t work for the insurance company. Their job is to help you find the best possible carrier and product for your need - period. If you have a captive agent you really like, you owe it to yourself to get a quote from an independent agent as well.

Blunder #5 - Procrastination…

Nothing good can come from delaying a life insurance purchase. If you develop an illness, your premium could go through the roof. Or, worse yet, you could simply be declined for insurance altogether.

Blunder #6 - Buying life insurance at work….

By all means take the life insurance your employer offers as a free benefit. Free is the absolute best deal you can get. But, if you are in good health, the life insurance you buy through your employer is almost certainly one of the most expensive purchases you will make. So, again, it depends. One thing for certain, you won’t get level term from work. So, your premium will likely go up every year.

Blunder #7 - Buying the options….

Riders, like Return of Premium rider (ROP), are very popular with insurance companies and with agents alike. These “options” inflate premiums and commissions significantly. But, usually, they just don’t make good financial sense. The pitch may be compelling. But, take time to think it through before you check the riders boxes. And, definitely read the small print when your policy arrives. Remember, the 10-day free look is the law. It’s your right to return the policy within ten days of receipt even if you just don’t like the color of the paper it’s printed on.

Blunder #8 - Buying insurance just based on ratings…

It’s important to consider the AM Best (www.ambest.com) and/or Standard and Poors (S&P) ratings for any insurance company from which you are considering purchasing a policy. Financial ratings are an measure of the viability of the firm. And, you don’t want to buy from a “here today gone tomorrow” carrier. But, ratings are not the whole story. Some companies just plain have poor service. This is one more area that a good agent can help you sort out.

Blunder #9 - Sticking with an old policy…

The insurance business is highly competitive, and insurance companies are constantly adjusting their rates. It’s not at all uncommon to find that you can replace an existing policy and save money on your premium. It pays to shop around. Maybe your current carrier is the company you shouldn’t keep.

Blunder #10 - Failure to exercise patience…

Let’s say you found an agent you like, and he or she helped you wade through the carriers and their offerings. You worked out the right amount of coverage, the right kind of insurance, and you have a pretty good idea where the underwriter will rate you. You completed an application. The paramedic showed up at your office, took a sample, weighed you and got the answer to a bunch of questions. The application is “pending.”

A couple of weeks go by and you hear nothing. This is the point where you need to exercise maximum patience. From here the process typically takes four to eight weeks. If the process drags on call your agent. If it takes longer than eight weeks, you may want to move your application to a different carrier. There’s no excuse for poor service.

The internet is all about information, and, more critically, the ability to compare facts, data and information from several different sources quickly and efficiently.

Arguably, as a direct result of this simple fact, nobody has felt the effects of a potential customer’s ability to find, check and compare such data than companies trying to sell services (as opposed to products) online.

Unlike a physical product, a service is not tangible, you cannot pick it up, feel it, or touch it. Thus, a service provider needs to supply the maximum amount of information, because the more information the potential customer has, the more confident he is likely to be when making the buying decision.

What better way to do this than via the worldwide web?

A perfect example of this is the automobile or car insurance marketplace. In the past, if you wanted to get the most competitive quotation for your car insurance, you had to “shop around” by trudging from one insurance broker or company’s office to another, or by getting on the telephone to do the same thing.

The problem with this was that it was often difficult, if not impossible to know whether you were truly comparing like with like. There were (and, to a large extent, still are) so many potential variations from one company’s policy to another that it was almost impossible to know whether the two policies that you were comparing really did offer identical levels of protection and benefits.

This was not always a bad thing. For example, all car insurance companies tend to “load” the premium (i.e. charge extra) for “young drivers” to be included on a policy, which can be bad news for parents using the family car to teach their son or daughter to drive. However, Company “A” may define a young driver as someone below the age of 18, whereas Company “B” will use a threshold of 21 years of age.

If your child was 19, the chances are that Company “A” will be the best bet in these circumstances.

In other words in the old days, it was absolutely necessary to “read the small print”, to avoid ending up with a automobile insurance policy that really did not meet your requirements, although it appeared at first as if it did.

Coming right back up to the present day, whilst the small print is still extremely important, the internet has effectively ensured that it is no longer so small! It is now possible to make meaningful and accurate comparisons of exactly what two companies are offering with their car insurance policy at the touch of a button.

You are still “shopping around” but you are doing it at our own speed, from the comfort of your own home.

In this way, the internet has made finding the best car insurance a far less stressful business than it was in the past, and has also guaranteed that the policy you buy is absolutely the most suitable for your own circumstances.