We run into a lot of consumers who want to compare our life insurance rates to their bank’s offer. Typically consumers think that because it’s from their bank, it must be worth applying for if they’re in the market. Think again.
There are 2 things you need to beware of when considering purchasing life insurance from your bank.
1. Life Insurance disguised as “Accidental Death Insurance”
Accidental death insurance only pays out if you die in an accident (there are even exclusions on the type of accidents that qualify). Many banks peddle these $5 - $25 per month accident policies through mailers or envelope stuffers because they are cheap, simple applications and are almost guaranteed issue. Easy payday for the banks, horrible coverage for the consumer. Especially when these offers are easily mistaken for traditional life insurance.
I recently spoke with a sweet as pie 78 year old lady who has a $35,000 life insurance policy from her bank for $12 per month. I had quoted her $292/mo for the same amount (currently the best rate on the market for her situation). She respectfully declined and truly believed her policy was traditional life insurance and was covered for ALL causes. I can tell you with confidence it was an accidental death policy. Hopefully she took my advice to pull out the policy and read it .
2. Overpriced Term Life Insurance
Banks who do offer traditional life insurance are typically aligned with only ONE life insurance company. For example, Bank of America offers Securian products ONLY. Wells Fargo pushes a simplified issued product through Great-West. The downside to only offering ONE life insurance company is you won’t be getting the most competitive rates or products on the market. You’re better off finding an independent agent who can secure the best individual life insurance rates for your situation.
Just because your bank holds your money doesn’t automatically mean they are looking out for your best interests. Your bank should only be used for – well, BANKING. Any consumer who does their due diligence and shops the market will find much better rates than what their bank offers.
Bottom Line: Check with an independent life insurance agent before pursuing a life insurance offer from your bank. Your bank account balance will be happy you did.