Last Updated 11/16/2018
Life insurance is designed to financially protect your family in case something happens to you. It gives you peace of mind knowing your family will be safeguarded in a tragedy. You may think you fully understand life insurance but, there are a few things insurance companies don’t want you to know.
If you want to have a comprehensive understanding of life insurance, here are 5 things insurance companies may be keeping from you.
Quick Article Guide:
- Insurance Companies Pay Higher Commissions for Specific Products
- You May Be Over Insured
- Insurance Companies Seldom Pay Out Policies
- Permanent Policies May Not be the Best Investment
- Policy Beneficiaries
- The Bottom Line
When you purchase life insurance, you should work with an insurance agent you trust. You want to find an agent that has your best interest in mind and will help you purchase a suitable policy.
Unfortunately, sometimes agents don’t have your best interest in mind. If you partner with an insurance agent who works solely with a specific company, they may be inclined to try to sell you a policy that will yield a higher commission for them.
If your insurance agent recommends an annuity or permanent life insurance policy, it’s a good idea to do additional research. Life insurance companies tend to pay higher bonuses for annuities and permanent life insurance. Some insurance agents may try to sway you to purchase an annuity or permanent policy even if it’s not a good fit for your financial situation.
Life insurance agents don’t make high commissions on term insurance policies. However, term life insurance tends to be the best policy for the average consumer.
Partner with an insurance agent who prioritizes your best interests and specific needs. Companies like Term Life Advice provide insurance experts that can help you select a policy that suits your needs. They are passionate about putting the consumer’s insurance needs first and making their customer’s satisfaction the top priority.
It’s likely that when an insurance agent evaluates the amount of coverage you need, they will overestimate. They may initially suggest numbers you think are outrageous.
Even if the insurance agent doesn’t think you need that amount of money, they may try to upsell you. If you end up purchasing a $750,000 policy, that policy still yields a sizeable commission for the insurance agent.
If you have other investment accounts and assets, you may only need a fraction of the proposed policy amount. The reality is, your life insurance policy is intended to be used to cover medical bills, final life expenses, outstanding debts, and living expenses for your family for a few years.
Before you purchase a life insurance policy, determine the appropriate amount of coverage you and your family will need. It’s not necessary to have more insurance coverage than you require.
Did you know that many consumers allow their permanent life insurance policies to lapse within the first few years?
If a life insurance policy lapses, the insurance company isn’t responsible for continuing coverage. What insurance companies neglect to mention is that you have the option to lower your premiums. It’s important to note that lowering your premiums will lower your death benefits as well.
An alternative option would be to surrender your policy and receive the accumulated cash value amount. If you have maintained your permanent life insurance premiums for years, you don’t want to leave any cash unclaimed. If you allow your policy to lapse, you won’t be eligible for any death benefit or payout of accumulated cash.
Another thing insurance companies don’t want you to know is that most consumers outlive their term life insurance policies. Statistics are generally not shared by providers and tend to vary by company. However, it’s estimated that less than 1% of term policies receive a payout.
Even though most companies don’t pay out their policies, this doesn’t mean you shouldn’t purchase protection. In case something were to happen to you, it’s always a good idea to have a plan in place to ensure your loved ones are taken care of; term policies can provide that protection.
Life insurance companies tend to make more money off permanent policies such a whole and universal insurance. Permanent insurance policies have two components: the death benefit and the cash value. Each month, a portion of your premium goes toward a cash value accumulation. This sum of money accumulates on a tax-differed basis.
Strictly using a permanent policy for investment purposes can be risky and have complicated terms. Returns are not guaranteed, therefore you could end up losing a portion of your death benefit.
Depending on your financial situation, it may be better to purchase a term life insurance policy and invest the difference in another investment opportunity. There are countless investment options that provide diversification and flexibility.
Additionally, if you find you do need permanent life insurance, you may be able to convert your term policy in the future.
Even though a lot of policies tend to lapse or expire, insurance companies still end up paying out billions in claims. A percentage of this sum goes unclaimed every year. According to state unclaimed property laws, insurance companies must report proceeds that remain unclaimed.
The Uniform Unclaimed Property Act (or the UUPA) states that life insurance companies have no responsibility to verify if an insurer has passed away and benefits are owed. Essentially, life insurance providers aren’t seeking beneficiaries.
The good news is, some states are requiring insurance companies to use the Social Security Administration’s Death Master File to find beneficiaries.
If you have an insurance policy, it’s important to inform your beneficiaries of your policy and let them know where they can locate the documentation. You should provide your beneficiaries with the policy number, insurance agency, and the value of the life insurance policy. As a policyholder, you must be continually proactive.
To locate any unclaimed money you may be owed, you can visit USA.gov.
There are many things insurance companies don’t want you to know. That’s why it’s important to work with an insurance expert you trust and who has your best interest in mind.
At Term Life Advice, we work with 63 top-rated life insurance companies to help our client’s find the most affordable life insurance coverage. We also offer no exam life insurance if you’re schedule is too full to meet with a nurse, or if need insurance in a hurry to collateralize a business loan.
Give us a call today at 855-902-6494 for some accurate rates to help you get started, or you can request an online quote below to instantly compare your options.