This is a guest post by Jeff Rose, CFP.
It doesn't matter what you want to buy, you always want to make sure you get the lowest rate. Whether it is a new car, a new TV or the latest tech gadget (iPad mini anyone?), there is no sense paying more than what you have to.
The same rules apply when buying life insurance. Life insurance has been commoditized so getting the lowest rate should not be difficult; you just have to make sure that you are looking in the right places. Here are the three ways to ensure that you are getting the lowest rate possible.
1. Use an Independent Agent.
Captive agents, such as State Farm, Northwestern Mutual or Farmers will try to convince you that they have the lowest rates possible. Most independent agents would agree when I say that I've been head-to-head with them too many times to know the truth. Using an independent agent allows you to partner with someone that has no bias towards any one company and that can truly shop for the cheapest term life rate for you.
When looking for an independent agent, you want to find one that has many different companies that they can work with. I have encountered a few agents that consider themselves independent, but based off the size of the agency, they are only able to work with one or two insurance companies. If your independent agent has a strong online presence, that should be a good indicator that they have the flexibility to work with multiple insurance companies. Independence should not be the sole criteria, however.
You want to find an independent insurance agent that is experienced. Jeff Root has demonstrated time and time again on his blog how he has been able to beat out other captive and independent agents on his pricing because he knows the industry and knows how to approach the underwriters. One client that had been treated for sleep apnea had already been give an offer of Standard from a previous company. Jeff was able to save his client several hundred dollars a year by getting the client a new offer at a Preferred rating class. Those who need whole life insurance for diabetics, may find Jeff as an asset to their search for a policy as well.
How was he able to do it? His experience of knowing which companies to approach and how to "pitch" the underwriter were the key factors. As you can see, experience and independence go a long way.
2. Avoid Non-medical Policies.
A lot of marketing materials nowadays boast "no-exam life insurance" or "how to get life insurance fast with no medical exam". It is not that these products are scams by any way; it is just that if you are going to go the non-medical route, you had better be ready to pay more.
If you are looking for the lowest insurance rate possible and are in good health, then a traditional term life insurance policy is going to make a lot of sense for a lot of people. There are situations that, due to time constraints, where a no exam life policy could make sense. One example that Jeff writes about is needing a collateral assignment on a business loan. Other examples are trying to satisfying a divorce decree where there is limited time to get a policy in force. a non-medical policy is going to make a lot of sense, but you can expect to pay more.
3. Know Your Body
Many different factors go into the price of the life insurance that you pay; your age, height and weight, face amount and term are the more common factors, but the biggest factor affecting all is your health. A life insurance company is going to want to know:
- How healthy are you?
- Are you taking care of yourself?
I have had several people apply for life insurance that have not had a physical from their doctor in several years. There is one thing that life insurance companies will not look favorably upon, especially if you are older. If you have some type of condition such as cancer, heart disease, diabetes, etc., then you are considered to be what is called "high risk" and it would be best to know exactly what is going on.
For example, if you are trying to get life insurance with diabetes, it is important to know the last time that you have been treated, your current a1C levels, and if you have any other health conditions. Having all this information up front is going to give your experienced independent agent a better understanding of what life insurance company to approach. Jeff has a comprehensive list of health questionnaires that a life insurance company will want to know before you apply.
Bottom Line on Getting the Lowest Term Rate
Getting a free term life quote is super easy nowadays. If fact, if you Google that term right now you'll find 161 million results to choose from! Before you go submitting your information to some faceless operation, makes sure it's an independent agent that knows his or her stuff.
Jeff Rose is a Certified Financial Planner and an Iraqi combat veteran. He runs the blogs GoodFinancialCents.com and LifeInsurancebyJeff.com.