Term Life Insurance Articles
How Much Insurance Agents Make By Selling Expensive Term Life Insurance Policies
2010-07-14
When buying a term life insurance be careful, you might be paying too much. The agent compensation package makes up a large percentage of the coat of your policy. Therefore, it would be wise to consider using a more anonymous method of buying your insurance, such as a web insurance agency.
There are two types of life insurance generally sold to the public; whole life and term life insurance. A whole life policy is called that because it lasts your whole life-there is no expiration date or term for that policy. It typically builds cash value that you can tap into, and the ultimate value of the policy will vary somewhat based on that value. It is typically much more expensive than a term life policy, which protects your family with a pre set benefit if you should pass on during the term.
The biggest benefit seems to be going to the insurance agent. The agent compensation for a term life insurance product is typically a staggering 30-50 percent of the premium of the first year of that policy. Let me repeat that-the agent compensation for your life insurance policy can be half of the premium you are paying in year one. Wow. If you are a 40 year old non smoker with a half million in coverage-and the general rule of thumb recommended by experts is that you insure yourself for five years of salary, so our 40 year old, who by the way is a guy who doesn't smoke in good health, is about 350 dollars a year. This means that the broker earns about $175 for selling you that policy in year one and gets a residual payment of $20 to $35 every year you continue to pay. If you are a 50 year old smoker, your agent has just hit the mother lode-the cost of a one million dollar for that customer policy is a staggering $6,000 a year, and the agent compensation for selling it would be $3,000. Not a bad day for the insurance agent.
Now that the lid is off the system in terms of agent's compensation for term life insurance policies, the question becomes what can the consumer do to keep from having to absorb that expense? You can call your agent and ask them to reduce their commission, but that isn't going to happen and might even be illegal in some states. The answer is the Internet. Consumers need to shop the web, make price and service comparisons. In all likelihood, they will be able to offer you a better price for a comparable product.
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When buying a term life insurance be careful, you might be paying too much. The agent compensation package makes up a large percentage of the coat of your policy. Therefore, it would be wise to consider using a more anonymous method of buying your insurance, such as a web insurance agency.
There are two types of life insurance generally sold to the public; whole life and term life insurance. A whole life policy is called that because it lasts your whole life-there is no expiration date or term for that policy. It typically builds cash value that you can tap into, and the ultimate value of the policy will vary somewhat based on that value. It is typically much more expensive than a term life policy, which protects your family with a pre set benefit if you should pass on during the term.
The biggest benefit seems to be going to the insurance agent. The agent compensation for a term life insurance product is typically a staggering 30-50 percent of the premium of the first year of that policy. Let me repeat that-the agent compensation for your life insurance policy can be half of the premium you are paying in year one. Wow. If you are a 40 year old non smoker with a half million in coverage-and the general rule of thumb recommended by experts is that you insure yourself for five years of salary, so our 40 year old, who by the way is a guy who doesn't smoke in good health, is about 350 dollars a year. This means that the broker earns about $175 for selling you that policy in year one and gets a residual payment of $20 to $35 every year you continue to pay. If you are a 50 year old smoker, your agent has just hit the mother lode-the cost of a one million dollar for that customer policy is a staggering $6,000 a year, and the agent compensation for selling it would be $3,000. Not a bad day for the insurance agent.
Now that the lid is off the system in terms of agent's compensation for term life insurance policies, the question becomes what can the consumer do to keep from having to absorb that expense? You can call your agent and ask them to reduce their commission, but that isn't going to happen and might even be illegal in some states. The answer is the Internet. Consumers need to shop the web, make price and service comparisons. In all likelihood, they will be able to offer you a better price for a comparable product.
