Why is life insurance purchased online less expensive than what I might find with a local agent?
Actually, it is not less expensive. There is a myth that life insurance is less expensive online than not online. Likely, this comes from the fact that most things – like electronics devices, cars, etc., have a margin of profit added that is negotiable. Some will charge less “on margin” to get your business, and this tendency can reset our expectations such that we assume it is true always - even for things where this rule does not apply. Though life insurance has a margin, it is “hardwired” into the premium that you see on a quote. It is not a negotiable margin, however. Were you to purchase directly from a carrier or from a broker or agent, the premium is what it is for the thing that you are buying and carriers publish only one rate for that specific thing. So, there is not a case where you can buy the same exact thing for less at another seller. Also, because there are higher costs associated with stocking refrigerators and cars in brick and mortar locations (vs online), those costs are included in the price you pay. If those costs vary, so will the price. Online sellers may have a lower cost (or no cost) for storage so you may get a better deal. This is not so with life insurance. Your policy is literally a contract printed on 25 or so sheets of paper. Until a policy is printed, it takes up no space. Once it is printed, it is sent to you. And, it is never on sale under a tent in order to clear the lot to make room for the 2015 models.
Not convinced? Do your own research: ask for the same EXACT policy, with the same EXACT rate class, from more than one quoting service online (such as Term.com or SelectQuote). Get another from your local broker or agent. See how Transamerica’s price for that plan (or Prudential’s price for that plan) does not vary from one quote to the next? Knowing this one bit of info can keep you from spending tons of time going in many directions to get the one thing you need – life insurance.
| 02.06.15 @ 21:33
There are a lot of start up insurance companies that operate online and are giving cheap quotes to get your business, be careful. If they aren't reputable and haven't been around their is a good chance they wont be when you need them.
Also, the online quotes are based on the best rating which is not a reality. When you go through underwriting and medical, then you see the quote is no longer possible. | 03.03.15 @ 22:13
Insurance like any other good or service has variables that affect pricing. One such variable is commissioned rates, what the insurance agent gets paid to write the policy. Reputable insurance companies with a virtual business model have fewer expenses than brick and mortar business models and can pass those savings on to their clients in the form of lower premiums on a particular insurance product. As a former insurance salesman, I highly encourage you to evaluate your insurance needs, and the types of insurance that will best suit your needs. As to why I no longer sell insurance, it is so I could educate individuals about financial products and how to maximize them to meet their financial objectives and goals. If I can be of service to you please let me know. | 12.31.15 @ 19:21