Ask yourself, what do you actually know about the life insurance industry? Do you know how it works? Why is life insurance necessary? How to get the best rates? Do you know who the most successful insurance companies are? And why they are so successful? Do these insurance companies have reputations supported by a robust financial foundation?
Well, we are here to go over five of the top secrets that life insurance companies around the country are hiding from you.
At CS Insured, we like to be as upfront and honest with our clients as possible. After all, how else can you build strong relationships if you are not known for your integrity? For this reason, we make sure that let our clients know crucial information about life insurance companies that they might not already know.
Fun Fact: There are currently more than 850 individual life insurers in the United States.
How much money does this translate into? Well, back in 2015, life insurers made more than 134 billion dollars in premiums, along with more than an additional 355 billion dollars in annuity premiums and deposits.
You and I both know that you work hard for your money. Because you need to purchase life insurance in order to provide your family with a financial safety net. However, there is a lot of information that you need to know about life insurance companies in order to get the most for your money.
Secret #1: You will not Get the Best Quotes Online
Every insurance company, all of their agents, and call centers have online quote systems in place. These are there to entice surfers to buy life insurance online.
What life insurance companies do not tell you is that most of these online quotes are only there to give you a ballpark idea as to what is actually available, and what you might qualify for.
Some life insurance quote systems only use a certain number of selected companies. Often these companies are ones whose rates are significantly higher than what is actually available elsewhere. But, because of the way that the online quote is presented, you are more than likely not going to know that. You will be led to think that you are getting the best and more affordable quotes out there.
Another aspect is that many life insurance companies like to provide rates that are not actually true. This is done to convince you that life insurance really is cheap to buy. What they are leaving out is that these low-cost quotes are only for people who would be sorted into their highest class. This means fit, young, clean driving record, no medical conditions and more. Being classified is rating, also known as the “preferred best” is quite difficult. SO much so that less than 5% of applicants actually qualify.
Secret #2: Insurance Companies Rarely Actually Have to Payout
When it comes to term life insurance policies, there are a lot of significant benefits that applicants need to consider. However, this is also one huge drawback that also needs to be taken into account. The fact that the majority of people who have term life insurance policies will survive to the end of their term. This means that most term life insurance policies are never paid out.
A life insurance policy can only be kept valid provided the premium is paid in full, throughout the time prescribed. Failing to pay your premiums will result in the policy becoming null and void. Once a policy lapses, you no longer have life insurance coverage.
For this reason, permanent life insurance policies have the most robust lapse rate. In fact, about a quarter of all permanent life insurance policies lapse in the first 3 years. Almost half of those who own such life insurance policies will expire within the first decade.
Another fact that life insurance companies fail to tell applicants is that you as the policyholder have the option of lowering your premiums. This can be done by reducing the amount you want your policy to cover in death benefits. This may allow you to keep the life insurance policy in force while still reducing what you pay on either a yearly or monthly basis.
If you have maintained a permanent life insurance policy over many years, it is in many ways a more desirable option to surrender the policy as opposing just to simply not paying. This will allow you to reap whatever you amassed in the cash value portion.
Secret #3: Insurance Companies Don’t Really Go Out of Their Way to Contact the Beneficiaries
Did you know that if you pass away and your beneficiary fails to file a claim, they are not likely to be contacted by the insurance company? That’s right! The majority of life insurance companies do not go out of their way to contact the beneficiary once someone passes away. Why is this? Because if no claim is filed, the life insurance company doesn’t have to pay anything out!
In more than five states throughout the country, there are life insurance companies who owe approximately 1 Billion dollars in unpaid claims. However, due to the fact that the beneficiaries did not know they were named on the policy, they never contacted the life insurance company. Without contacting the company, no claim can be filed, and no death benefits paid out!
Now, some states are beginning to enforce laws that make insurance companies use the Social Security Administration’s Death Master File to try to locate these beneficiaries. But even then, it is a slow and drawn-out process that really does not provide any guarantee.
So what does this mean? This means that when you choose someone to be on listed as your beneficiary, it is vital that you tell them! Take a few minutes and go over where the policy is kept and how to contact the insurance company when the time comes.
Secret #4: Term Life Insurance is Cheap, but it isn’t Always the Way to Go
Many life insurance companies expect their agents to focus on selling you what is called “term” life insurance policies. The word “term” means “temporary,” or short-term lasting—in most cases—until age 65.
Because the life insurance companies make significantly more money, and the agents who sell these policies tend to earn quite a more substantial commission than when working through the complex underwriting requirements of whole life insurance. However, while term life insurance is cheaper, it is cheap for a reason: it does not accumulate any cash value, nor earn any interest on your premiums over time. When you pay your premiums for a term policy, it is gone out the door and never coming back.
The truth is that most young Americans are better served buying whole life insurance that is tied to an index, rather than buying a cheap term policy and investing the rest into funds that hardly match the guaranteed minimum returns of a good life policy. However, whole life insurance is not for everyone, so be sure to contact the specialists at CS Insurance Group to find out which option is right for you.
Secret #5: Life Insurance Agents Receive Commissions Based on Which Products They Sell
Related to the last secret, life insurance agents receive a more substantial commission amount if they sell a particular product. With that said, you should be mindful of what kind of life insurance you truly need, for it is generally far more profitable for insurance agents to sell term life policies vs paperwork-intensive whole life policies. So make sure that you are confident in who you are working with, and never feel pressured into buying something that you are not comfortable with.