Does it really help to get a bunch of quotes? Everyone says shop around but the more I shop the more confused I get. What is the solution?

Asked by Brian

9 Answers

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Hi Brian. Good question!

First, let’s point your question to term insurance only, since permanent plans can be daunting (and sleep inducing) to “unpack” and compare.

A friend was trying to compare two CUSTOM homes, different and priced differently, too. Because this was an “apples to oranges” comparison, it was difficult to say which was the “best” one, and cost was less useful as a way of sizing them up leading to a final decision. Term insurance (without added riders) are not custom designed. We are talking about simple policies where premium is paid - and when someone leaves the planet someone else receives a death benefit. With term, the price can be used to cut to the chase.

Two homes (term policies) are exactly alike, on the same street, but one is priced higher. There is a difference in price, but not a difference in the items themselves. So, you buy the least expensive one. You are done.

One term quote: you can see 5 different carriers on one spreadsheet, showing lowest to highest cost. Each carrier is rated A+, so you have 5 A+ rated carriers. The rating
tells you about the claims paying history and investment profile of each. Given that all are A+, we can say that except for price they are virtually no different. You choose the
least expensive one. You are done – unless you…

Go and get a BUNCH OF QUOTES! If you have read several responses in the last 10 days at MoneyTips.com, you’ve read that all carriers publish one price for a plan; Protective Life’s 20 year term, preferred rate class, 250K face amount is the same price no matter where you go to get it. So, a BUNCH OF QUOTES later, you discover that Protective Life’s 20 year term, preferred rate class, 250K face amount is the same price no matter where you go to get it. Transamerica, too? Yep. John Hancock? Yep. Getting this 5” stack of info took 2 hours of your life to compile, plus talk time (your ear has yet to recover). And, it gets worse, because now you’re totally confused.

Solution: start with what is most important – before you attempt to use cost as the most significant determinant for making a choice – get a better sense of what it is that you need. Let’s say you need 30 year term, 250K. Stick with that as the basis of all quotes so you don’t get 10/15/20/25 and 30 year quotes for 6 different face amounts! Speak with a couple of professionals and get a 5 carrier view of what’s available from them. Your pros will tune you in on the right rate class for you. They can help you determine the need, too. In fact, I am pretty good at that after helping thousands with those same issues over a number of years.

Seems you can afford the recommended plan. It’s the right plan, so now it’s time to buy. Buy from the person with the best advice. Buy from the person who asked you questions about what matters most to you, not them. You are done.
| 02.12.15 @ 00:38
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
A
Answered by Arin
Shopping around is a good thing, but ultimately it's better to pay a few dollars more and have it done by someone you trust and someone that will do it right. Also a company that is reputable and will be their when you need them.

I come across many clients that got a great deal but the policy wasn't what they expected to be costing them much more in the long run.

| 03.03.15 @ 22:10
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
D
Answered by David
I am a proponent of Indexed Universal Life Plans with a Living Benefit Rider. This type of Life Insurance gives you the best of all worlds for the following reasons:

1. It's like a 401k in that you can chose the amount you want to contribute monthly

2. Because the plan is "Indexed" you have ZERO downside risk when the stock market drops, and an upside potential of 13% annually when the market is climbing. In other words, your gains are locked in each year when the market is rising, and you avoid portfolio killing down years when the market is falling.

3. Based on your age and monthly contribution, a life insurance policy is established for an amount that is within the IRS guidelines that allows you to withdraw your money TAX FREE at any age.

4. The Living Benefit rider is a no cost option, and allows you to access your life insurance face amount should you experience a critical illness like cancer, heart attack or stoke, in additional to chronic illnesses as well.. This tax free cash is available to use in any way you see fit, including paying bills, mortgage, college fess for the children, should your income suffer at work due to your illness, or even use it for life saving treatments that may not be available in this country.

5. When you are ready to retire, you can turn on a guaranteed lifetime income stream that you can not out live, and it's Tax Free cash.

6. Upon your passing, you will pass on a death benefit to your heirs that is estate and inheritance tax free.

Please feel free to contact me for an illustration of exactly how this all works.
| 03.04.15 @ 17:11
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
Answered by Bradford Creger, MoneyTips ContributorPRO+ in Pasadena, CA
Brian,
It makes NO SENSE to shop around in the manner which has been described in the previous answers. Any quote you have received thus far is meaningless. Let me explain a better approach to finding the right policy for you. But first you MUST recognize that ALL of the insurance companies require that you use an Agent to purchase your life insurance. With that understanding, there is very little reason to DIY on the process.

Unfortunately it is often VERY difficult to find an Agent that you can trust to give you advice that is in your best interests. Many Agents have an agenda and push that idea on the buyer regardless of their financial circumstances and David’s answer above seems to prove this point. I have seen this same “answer” provided by him in response to other questions. Now what David is saying about EIUL is accurate and I actually agree with much of what he’s saying – but the truth about a particular product’s features is not an answer to a question about the “process” of quoting life insurance.

What Kirby shared is good information as well. Unfortunately he’s not given you any information that will help you through your current situation. As far as Arin’s answer… well I agree that you need to find someone you trust – BUT, that should not increase the cost! You won’t “pay a few more dollars” as he suggested. In fact, “doing it right” the first time SHOULD save you the costs of replacing a bad policy later.

So how does one “get quotes” on life insurance?

First: Find an Agent that you trust. Second: Sign a “Trial Application” which includes a HIPAA (Health Insurance Portability and Accountability Act of 1996) release. This HIPAA release will allow your Agent to obtain your medical records from your doctors. These medical records are referred to as your Attending Physicians’ Statements (or APSs.) Finally: Once your APSs are received, the Agent should prepare a cover letter describing you and your situation (both medically and financially.) The cover letter and your APSs are then sent to the various insurance companies under the “trial application” signed earlier.

The trial application process puts your medical records in front of an underwriter at multiple insurance companies on an informal basis. Because you haven’t actually applied to any of the insurance companies, the company cannot submit their findings to the MIB (or Medical Information Bureau.) Think of the MIB as keeping your “medical ratings” much like a credit bureau keeps records on your credit payment history. If you just blindly apply to an insurance company and get declined or rated due to your health, every other insurance company can see this when they pull your records from the MIB. If you have been rated or declined by multiple insurance companies, this may hurt your ability to get the best price from another insurance company that was “on the fence.”

Your APSs are sent to an “underwriter” who is tasked with “pricing” your health compared to others they have insured who are the same age and gender as you are. When the underwriter sees that other underwriters from other companies have rated or declined you… they will probably be less willing to take the chance if you are on the borderline of a better rating. The insurance company underwriters are trying to give you the best rating that they justify given your medical records. You don’t want them to see any other opinions.

Most importantly, using a trail application process allows the Agent to use these preliminary offers to get better offers from those companies that may have rated or declined. Keep in mind, every insurance company wants to sell their insurance. This informal shopping process ensures that you are getting the best possible rate from each of the insurance companies who have received your records.

If you’re in perfect health, then this process of shopping your medical records may not be necessary – but it’s still not a bad idea. The insurance companies will require your medical records anyway, so your Agent might as well obtain them early and use them for your benefit.

So what this trial application process typically does is to provide you and your Agent with multiple “best” offers (subject to an exam) from various insurance companies that you can use to PRICE the insurance product you are considering. YES – the insurance companies are bound to these offers unless they find something in your blood or urine that will change it. So now your Agent is providing you with accurate quotes showing the actual price that you will pay for the insurance product you are considering.

Shopping in ANY other way is a “best guess” and most likely a complete waste of time unless you are in perfect health. If you are in perfect health then you can just use the insurance company’s best rating and ask for a quote. Unfortunately, most Americans aren’t in perfect health. Consider that even being 10-15 pounds over your target weight (as defined by each insurance company) may drop you from Preferred to Standard.

Why doesn’t every Agent follow this process? Because obtaining your medical records can cost anywhere from $100 to $300 per doctor. If you don’t buy life insurance then the Agent is stuck with the costs of obtaining these records. If you buy the insurance, then these costs are reimbursed by the insurance company. You can see that the economics of the trial application process can prevent many Agents from following this best practice. On top of this, too many people are merely “shopping” in an effort to get a general sense of what it might cost, but they are not ready to buy and do not share this fact with their Agent.

Remember – that first suggestion? Find an Agent you can trust? That also means that you must be a “trustworthy” client. Finding an Agent is a two-way relationship and trust is the most important ingredient so please be honest about what your intentions are. If you’re just shopping, tell this to the Agent. If you are ready to buy, tell this to the Agent.

The best way to find an Agent is to ask several trusted friends who they have used and interview each of these Agents to make a decision.

The first thing to ask the Agent is the process they follow when they are helping you shop for insurance. If they merely “sell” insurance they may do it the way described in an earlier answer. If they are more acting in the capacity of an “advisor”, then they should be using the trial application process. If your Agent works for a big company, they should be able to afford the occasional cost of an APS if you turn out to be uninsurable.

If your Agent is “captive” (meaning they are not independent) and rather are working for a large insurance company, make sure they have access to a “brokerage” system whereby they can offer the products of other insurance companies. When you are working with a captive Agent, your biggest concern is that most of these Agents blindly sell the proprietary product even when a competitor’s product is better suited in your situation due to the sales pressures from management.

I hope this helps. I would be happy to answer any follow up questions you may have regarding the trial application process.
Brad
| 11.05.15 @ 15:53
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
Bradford wrote: "What Kirby shared is good information as well. Unfortunately he’s not given you any information that will help you through your current situation."

Kirby wrote: Speak with a couple of professionals and get a 5 carrier view of what’s available from them. Your pros will tune you in on the right rate class for you. They can help you determine the need, too.

And: Buy from the person with the best advice. Buy from the person who asked you questions about what matters most to you, not them.

Kirby
LifeInsuranceToday.US
Term.com



| 12.17.15 @ 18:34
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
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Answered by rohloff
Hi Brian, I think you'll find there are about 3 quote engines for all of us, so you'll often get the same companies on your proposals. I do suggest you use a CLU (Chartered Life Underwriter) because of our ethics oath. That, alone, won't guarantee success, but it should increase your probability of getting someone who cares more for you than for his commissions.
Best wishes,
Gaylord | 01.20.16 @ 02:37
Comment 1  
Kirby Thomas, Online Life Insurance Rate Comparison: Term.comPRO+ in San Diego, CA — Brian is signalling something that professionals know but that the general public does not seem to know, and it is this. Carriers publish prices for plans, and they don't give Brian one price for that plan and Kirby another price for that plan. If Brian tells you on a spreadsheet (from one of the 3 or so quote engines!) that Protective Life's 20 year term, 200K, preferred rate class is 40,00 per month, you will find that anywhere you see that exact same plan, you will see that exact same price. Unfortunately, most shoppers assume that we all have different prices for the plan they want so they get multiple quotes and put us all to work generating the same numbers. Truth be told, the cost for the top 2 carriers on any spreadsheet are usually only about a dollar apart on a monthly premium - for the exact same plan. I wish (in a perfect world) that consumers knew what Brian knows. That way, they could go to him or me and get a quote, see the similarities, buy the right coverage, and that way we could skip the 10 quotes for the same the same thing scenario, but that will not likely happen any time soon. And regarding the oath; personally, we all have our convictions - and time tells who will display appropriate behavior. Check out Brian - and Kirby - at your state department of insurance website for grievances posted by the public. It may help you decide if your advisor is as ethical as you expect them to be. | 01.20.16 @ 03:26
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
Answered by Steven Etimos, Insurance Agent in West Islip, NY
Brian, shopping for insurance is always a wise decision if done properly. First depending upon the type of coverage you are looking for have each insurance agent quote on the same limits and coverage, Then ask them for their recommendations. Going to an independent Insurance agent such as myself allows me to shop a variety of companies for you. Brewster Allen Wichert represents over 20 different carriers for Home, Auto and Business insurance. Life Insurance we have contracts with over 10. So we can do the shopping for you. Call me with questions, the number is on my profile page. | 01.28.16 @ 18:31
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
Find an independent agent and have them shop for you a bit. Then you can review with them all the choices and minimize the confusion of DIYing it. | 02.23.16 @ 23:42
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
Answered by Barbara Coats, Financial Adviser in Starkville, MS
My advice would be to start local. You want an agent who you know, or at least can get to know. This is too important a purchase to make via computer or on the phone. And if the person you're talking to cannot explain the policy options so that you can understand them, find a new person! Again, this is too important to take chances. | 03.08.16 @ 21:03
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 18:29
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