Life insurance is a necessity, especially if you are married and have children or other dependents who rely on you for financial support. If you have not purchased life insurance before, or if you are looking for additional coverage, you may be wondering about the best way to find and purchase the right policy.
Life insurance can be purchased directly from a life insurance company or through a licensed independent insurance agent. What are some of the life insurance options you can purchase? And what is the best method for purchasing it—directly from an insurance company, or using a trusted local agent to guide you?
Types of Life Insurance
Life insurance is a way to provide some financial support to your family upon your death, whether you have debts to pay or you simply want to provide for your own burial service. Some people have a greater need for life insurance than others. Your marital status, the size of your family, your current and future financial obligations, your career stage, and your ultimate goals for the policy will help you determine if you need life insurance coverage. These factors can also help you decide what type of life insurance to buy. There are two main types of life insurance:
- Term life insurance provides protection for a certain period of time, such as 10, 20, or 30 years. It is the simplest form of life insurance, and allows you to provide for your final expenses and income replacement for your surviving spouse and children.
- Permanent life insurance is a complex financial tool that provides a death benefit as well as a long-term savings or investment component that builds up cash value over time. Permanent life insurance comes in many forms, such as variable life insurance and universal life insurance.
Purchasing term or permanent life insurance typically requires that you fill out an application with detailed medical questions and agree to a limited medical exam and/or blood tests. This process is referred to as medical underwriting. It allows the insurance company to assess your general health and determine how risky you are to insure. If you have serious or chronic health problems, you will likely be charged more or may even be rejected for coverage.
You may have also heard about burial insurance, or final expense insurance. Burial insurance is a type of life insurance that typically offers a death benefit of $5,000 to $25,000 to pay for funeral costs for the insured individual.
Burial insurance can often be purchased easily by completing an application and answering a few limited medical questions. It can be seen as an attractive way for someone with limited means to help their family, but without medical underwriting, burial insurance may actually be more expensive than other types of life insurance.
Before buying burial insurance, be sure to investigate other forms of life insurance, such as term life insurance, that may be more affordable and offer greater benefits.
What is Direct Life Insurance?
You have probably seen a lot of TV advertisements about quick and easy online life insurance quotes. This is usually a form of direct life insurance.
Direct life insurance is purchased online, directly from an insurance company. And while it may be quick, easy, convenient—and sometimes cheaper—is it really the best option for you?
If you want life insurance fast with little hassle, it may be the right way to go. What’s more, direct life insurance companies may offer “guaranteed issue” life insurance with no medical tests for those who can’t get coverage elsewhere due to their health.
If you want to purchase direct life insurance, you do the work on your own time. And you may even save some money because the insurance company does not have to pay commissions or fees to an agent. The process is simple: you fill out an online application, wait for quotes, choose your policy, and pay. Coverage can be obtained very quickly from trustworthy, financially sound insurance companies.
But there are some clear disadvantages for you to consider, too. When you buy direct life insurance, you are limited by the products and underwriting guidelines of the online insurer. If a different type of life insurance product were more suitable for your needs, how would you know? If your application is rejected for health reasons, you have to start the process all over again with a different direct life insurance company, and could perhaps face the same result.
What Are the Advantages of Buying from an Agent?
Buying life insurance (and making sure you get it right) is arguably more important than buying some other commodity. If your biggest concern is speed, convenience, and price, you might only get out what you are willing to put in. That is not to say that you can’t buy great direct life insurance. But it is entirely your responsibility to educate yourself on what type of policy you need, how much coverage you need, and how much it should cost. If you work with a local agent, you have an educated professional helping you assess your family’s goals for the policy and evaluate all of your options.
By buying direct, you give up the opportunity to talk to an expert and get advice. If you are not willing to take the time to educate yourself, you could make a mistake that could cost your family dearly if a claim needs to be made.
There is no doubt that working with an agent will take longer. The agent will act as a middleman, collecting information and preparing the application that you would otherwise do yourself. And you may even pay more when you work with an agent, but not always.
Buying life insurance with an agent instead of buying direct offers several other advantages, including the following:
- An agent can shop several different life insurance companies at the same time, and can share various quotes and policy offerings with you just once, allowing you to make an informed and complete assessment of your options and the best choice for your needs.
- An insurance agent can make sure you are not paying for something you don’t need. Conversely, they can ensure that you are purchasing enough coverage to meet your goals.
- Agents often have relationships with numerous insurance companies and know which ones specialize in certain types of risks, or will insure individuals with particular lifestyle or health factors. If you are considered to be a greater risk for insurance companies, an agent might be able to help you find life insurance that you cannot find online.
- Your insurance agent can make sure that your application is complete and that your answers will not jeopardize any claim that you might make in the future.
- Insurance agents can provide personal service. Agents often personally handle customer claims, and have been through the process numerous times. If you have to file a claim with an online insurer, you can expect to deal with a call center that handles hundreds of calls every day. A local agent can offer the personal service you need to help your family through a difficult time.
Agent vs. Direct: Which Approach Is Best?
There is no right or wrong answer; your personal needs should dictate which method is best for purchasing life insurance. However, it is important to only choose a financially sound insurer that will be there for the long-term. You can find insurance company ratings from A.M. Best and other financial ratings providers.
You might find that using both methods is the best way to get the coverage you need. Consider browsing online, even getting some quotes, and then sharing those with a local agent as a starting point. A Trusted Choice® agent can help make your task easier. These agents can find competitive quotes and provide the advice you need to make the best choice.