5 Secrets Life Insurance Companies Don’t Want You to Know

Basic Information about Insurance : " Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss".



Secret 1. Permanent Life Insurance Is Not a Good Investment

Many life insurance want their agents to focus on selling you permanent life insurance policies such as Whole Life and Universal life.

Why?


Because the companies makes a lot more money, and the agents who sell these policies make a lot more commission than they do for Term life insurance.

In the first year that you pay premiums, much of that premium is used to pay the agent’s commission. In the following years a good chunk of your premium is applied towards covering the death benefits portion and administrative fees.

By the way, part of your premiums are used to pay administrative fees throughout the life of the policy. Most insurance companies are very secretive about the cost of these fees.

The majority of Americans are better served buying term life insurance and investing the rest.

How much more does a permanent policy cost than a term life insurance policy?


A healthy 30 year old non-smoking male (even cheaper for a female) can buy a 20 year term policy with $500,000 in death benefits for around $246 dollars per year. Buying a lifetime Whole life policy worth $500,000 would cost approximately $5,178 dollars per year.


Secret 2. Shopping Online Won’t Get You The Best Rates

Every company, their agents and life insurance call centers have online quote systems to entice surfers to buy life insurance online.

What they don’t tell you is that most of these online quote systems only give you a part of the story. What they don’t tell you is life insurance industry secretsthat the companies that pop up with quotes are only a portion of what is actually available.

Some quote systems only use a certain number of preferred companies whose rates are generally much higher than what is available elsewhere. But, you don’t know that because you likely think you are getting the best and most affordable quotes available…

You’re not!!

Another aspect is that many companies like to give sample rates to show you how cheap life insurance is to buy. What they don’t tell you is that these low cost quotes are only for those people who would qualify for a “Preferred Best” rating which is the best anyone can qualify for.


The truth is that LESS THAN 5% of you will qualify for a “Preferred Best” rating. Each change in the rating classification means tacking an additional 25% on to your premium.


Secret 3. Life Insurance Companies Pay Agents Higher Commissions for Selling Certain Products

The average American consumer should be very wary of any agent who tries to sell some alternative life insurance product other than term life insurance such as a permanent policy or an annuity.

This applies to all agents, including some independent agents.

Some life insurance companies offer a higher bonus for selling these products. Making more money is a temptation that some agents unfortunately can’t pass up. This is to your detriment.


Agents don’t make big commissions on term life insurance and can make a lot more on permanent policies. An annuity, on the other hand, reaps even more commission for the agent.

Secret 4. Life Insurers Rarely Have to Pay Out

Did you know  the vast majority of people who have term policies will likely survive to the end of their term? But since many others don’t, you still want to have protection in place.

A policy can only be maintained in force provided the premium is paid in full, in the time prescribed. Failing to do so will result in the policy to lapsing.  Once a policy lapses, you have no life insurance coverage.
Needless to say, permanent policies have the strongest lapse rate. As many as 25% of people with these policies allow them to lapse in the first 3 years. An incredible 40% of those who own such policies will lapse within 10 years! 
One thing life insurers fail to mention is that you do have the option of lowering your premiums by reducing the amount of your death benefits. This may allow you to keep the policy in force and reduce what you pay.
If you have maintained a permanent life insurance policy for a number of years, it’s a better option to surrender the policy as opposing to just letting it lapse so you can at least reap whatever you amassed in the cash value portion.


Secret 5. Life Insurance Companies Don’t Look Hard to Find Beneficiaries

If you die and your beneficiary doesn’t file a claim, many life insurers really don’t try very hard to track down the beneficiary to pay the claim.
In three states alone, there are about a dozen insurers who owe approximately $1 Billion dollars in claims. But, because the beneficiaries did not know they were named on the policy, they have not contacted the life insurance company to file a claim.
The life insurance companies did not make much effort – if at all – to find the beneficiary who has not been paid while the money owed sits in limbo.
Some states are now forcing these insurers to use the Social Security Administration’s Death Master File to try to locate these beneficiaries.
The lesson? When you name a person beneficiary, make sure you tell them you have a policy and where they can find it.
Additionally, it is vital that you contact the person to let them know that you named them beneficiary. You should also provide them with the policy number, the issuing agency and the value of the policy.




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