Your Life Insurance Agent is More Important than the Policy Itself

If you have read any of my other articles, you are probably well-versed on the basic things that could go wrong during the application process and throughout the lifetime of a life insurance policy. From a material misrepresentation on an application, to errors in coverage placement, to lapsed premium payments, all the way to beneficiary disputes, there are thousands of small things that could create huge problems for life insurance consumers and beneficiaries in the future. However, many of these things aren’t entirely out of your control. 

One huge step toward minimizing your risks is finding the right insurance professional to assist you in acquiring and maintaining a life insurance policy. Let’s start with the basics. First, what are the different types of life insurance professionals out there? 

Life Insurance Agent – a licensed person who is generally employed by one or several insurance companies to sell life insurance on behalf of the companies. An agent acts as an extension of the company, and usually collects commission on the sale of life insurance policies from the insurance company. A life insurance agent is a representative of the life insurance company and has the authority to bind coverage. 

Life Insurance Broker – a licensed person who generally works on behalf of the customer to solicit and compare policy information from multiple companies to select the right coverage for their customer. When it is time to apply for coverage, however, the broker must usually work with an agent of the insurance company to complete the application process and bind coverage. Life Insurance brokers also usually collect commission on the sale of life insurance policies. 

Financial Advisor – a licensed person who provides a range of financial guidance to customers for compensation. Often times, financial advisors also act as a broker for insurance products which serve as financial tools for customers including life insurance. Financial advisors that are not directly associated with any insurance company (independent practitioners) who are registered investment advisors are held to a very high standard when it comes to dealing with customers and their financial needs. Financial advisors who focus mainly on selling insurance products from specific insurance companies are bound by the requirements laid out in their employment contracts with the companies. 

Life Insurance Attorney – a licensed attorney who is well-versed in the area of life insurance. Life insurance lawyers are hard to come by, but are able to provide valuable guidance to clients with regards to the legal responsibilities and liabilities of other life insurance professionals, and possible future problems with coverage that may arise.  Life Insurance attorneys can also provide an explanation of provisions in the policy that may be cause for concern or confusion. In addition, life insurance attorneys come to the rescue after an insured person has passed away and a claim for life insurance benefits has been delayed or denied for any reason. 

Okay, now that we know the players, let’s get to know the game. If you read through the above definitions, one thing should have stood out to you the most: each of the life insurance professionals have similar motivations for selling or placing life insurance coverage. I like to believe that life insurance agents, brokers, and financial advisors are all motivated to try to do the right thing by their customers. However, a common competing motivation is their compensation. As you know, money is a huge motivator for most human beings, and life insurance professionals are no different. That doesn’t necessarily make any single professional bad or wrong. It’s only a cause for concern if compensation is the primary motivator, rather than your best interest. 

“…money as a primary motivator for placing life insurance coverage can, and likely will cause the coverage to fall through at some point.”

You might be wondering, how this is different from any other professional service out there. The answer is that money as a primary motivator for placing life insurance coverage can, and likely will cause the coverage to fall through at some point. For example:

•  If a life insurance professional is focused on placing the highest policy value possible without concern for the customer’s financial situation, it is highly likely that the policy will lapse in the future because the customer can’t afford the premiums. 

• If a life insurance professional is focused on making the sale rather than making sure the application is done correctly, it is highly likely that the application will contain inaccurate or incomplete information. If the insured dies within the first two years of the policy, it is almost guaranteed that the claim for death benefits will be denied as a result. 

• If a life insurance professional doesn’t take the time to sit down with their customer and explain the policy being sold, it is highly likely that there will be very important provisions that will affect coverage in the future unbeknownst to the customer. This might mean that the premium will increase at a certain age, the policy may need to be renewed at a certain point, or there are additional benefits that the customer is paying for but is unaware of entirely. 

These are just a few examples of how money as a primary motivator for a life insurance professional can cause serious problems for a customer or their loved ones in the future. Now, you might be thinking: “Great, you’ve given me all of these issues and no solution..” Unfortunately, the only solution for these issues is to do your homework. By reading this post, you already have a leg up! Keep going. Read reviews, interview different professionals, and look into recommendations from trusted sources. If you still feel lost, call (484.604.9488), text (484.604.9488) or email (Taylor@lifelegalservices.com) me and we can work together to find the right life insurance professional for your needs!