Credit Union Life Insurance Review
By James Tobin, CFP®
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Expert Review Of Credit Union Life Insurance
Jim Tobin, CFP®
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Credit Union Life Insurance
If you have been considering buying life insurance from your local Credit Union branch and wanted to do some research first, you have landed in a good spot. This credit union life insurance review will address, product offerings and alternatives, as well as advice on how to get the best deal possible on life insurance.
For most of your banking needs, credit unions are a great deal. Credit unions operate for their members, not shareholders, for this reason they tend to have lower fees, better interest rates, and friendlier service. This assessment refers to checking and savings accounts, credit cards, car loans and even mortgages.
Life insurance, however, is not one of the strengths of the local credit union. Credit unions like commercial banks, do not have their own life insurance lines, rather their broker third party carriers. This is in many ways the same model as independent agents, but the differences in focus are significant.
The third patry carrier generally associated with credit unions is CMFG, a privately held carrier marketed exclusively to the credit union market. CMFG is "A" rated and often competitive with term rates. However, usually being the only life insurance carrier offered by credit unions, is never the best model for the end consumer.
As will be explained in detail below, the best choices for shopping life insurance policies relies, not only on trusted professionals, but upon having multiple provider options. .
Credit Union Life Insurance Review: Why Are Credit Unions Not A Good Fit For Life Insurance?
Although, the answers to this question come off as self serving, they are also demonstrably true. This will be shown in the case study later in this article.
I'm not talking about how nice or neat the credit union personal banker is or if he offers you tea with lemon, I'm referring to policy service. Your term policy will be in-force for 10-30 years and in that time you may change beneficiaries, addresses, or activate a policy rider. Do you think that the personal banker will still be there? Your chances are better than with the big commercial banks, but far from guaranteed.
If you are insured through CMFG/CUNA you may be okay as long as the credit union continues to use that carrier as the life insurance carrier of choice. Should they change preferred carriers ..who hows?
Alternatively, an experienced independent agents will be interested, even eager, to do service work because that is how we earn referrals.
2. Laser Focus
Experienced life insurance agents generally don't do anything else. There are exceptions, usually agents who cross sell Disability, long term care & medicare supplemental insurance.
However, there is no time spent opening checking accounts, selling mutual funds, and playing office politics. This allows the best agents to find you the best deal for your unique situation.
Finding the best deal for your unique situation is sometimes, but not usually, as easy as using the free quote tool. This is because different insurance carriers have different appetites for specific risks.
Choice Of Carriers
Credit Unions (like commercial banks) offer the best deal among the carriers they carry. This is no different than most independent agents, accept they have fewer companies from which to choose (in fact with credit unions there is often only one choice:CMFG).
With commercial banks the reason for this is simple, they negotiate the highest commissions in the industry because they do big volume business. So, in order to maintain the volume requirements for specific companies they must limit the number of carriers. This is sound business for them, but it limits the ability to find the best solution for the clients unique circumstance.
Credit Unions tend not to be as profit oriented. However, they also lack the necessary variety of carriers needed to get the best deal for client health niches. This is in large part, because they offer so many services, they can't know all the carrier niches.
Experienced Independent Agents
Experienced independent life insurance agents have the niche carriers available and, they understand the underwriting guidelines.
If you are in perfect health knowing the guidelines shouldn't matter because you will be preferred plus everywhere. In this case you really can just use the quote tool. However, if you have a health condition, having an agent that knows the underwriting guidelines at various carriers is the key to finding the best deal possible for your specific condition.
Experienced agents will also be better able to talk intelligently about the cost benefit of available riders. these include accelerated benefit riders,child riders, and waiver of premium riders.
Example Of Using An Experienced Independent Agent Rather Than Credit Union Banker For Life Insurance
For example Prudential may have more of an appetite for the risk that say, Crohn's Disease presents than say Banner Life. In this case the underwriting grade will reflect this increased appetite.
So, if your personal banker only represented one carrier and you found out later that that you could have gotten a rate 26% or 45% better, how would you feel?
You'd probably be peeved either at the banker or yourself or both. So it's important that your Agent represent multiple carriers.
In fact a good independent agent will have access to over 50 carriers. This ensures the best chance at a good rate.
Credit Union Life Insurance Review : Case Study Using Independent Agent Rather Than Credit Union Banker
Please see the case study below. It will pay off my earlier promise to demonstrate how using an independent agent rather than a credit union with a limited carrier line up, will save a lot of money.
For the example we have borrowed from a Life Insurance Help Desk article on life insurance after a heart attack.
Gender: Male Age: 50
$250000 20 Year Term
Previous heart attack 5 1/2 years earlier.
Use of statin medication to control cholesterol and regular follow up with cardiologist
This looks like a rated case that could possibly get a standard class at a carrier depending on the insurers appetite for a heart attack. Let's take a look at the rates.
- Standard Rates
- Table 2/B Rates
- Table 4/D Rates
Life Insurance Company
Life Insurance Company
Life Insurance Company
This table which shows only a few of the major life insurance companies available illustrates the difference in rates. For standard rates Prudential is 20% more expensive than Lincoln.
On it's face this seems like a pretty straight forward choice and if underwriting grades between carriers is the same, it really can be that simple.
This kind of easy price shopping is particularly useful for younger folks in good health and demonstrates why you want to use an independent Agent.
For people who suffer from a heart attack history or any other serious diagnosis, it gets much more complicated.
Because life insurers manage their appetite for specific risks by being more lenient or more stringent with underwriting grades, you need to know which company will grade you a standard risk and which ones will grade you as table 2 - table 4.
In the case above Prudential (the most expensive standard rate) is likely to be the best deal because the more competitively priced carriers will likely rate the risk Table 2 while Pru might well go Standard
This is something you can't know by simply looking at the lowest price. In this hypothetical using an independent agent could save you 50% (the difference between Prudential @ Standard and Lincoln @ Table 2 ($170.29)
Your Next Steps
Thank you for using the Life Insurance Help Desk to research credit union life insurance. If you would like to learn more about working with an experienced independent agent, you can do a step by step review of the process here.
When you are ready to apply, you will get totally transparent pricing (we'll even share our computer screen with you if you'd like), and making the application process as painless as possible.
Thank you for using The Life Insurance Help Desk as a resource and please don't hesitate to call or contact us.
Bonus: The 5 most common mistakes people make buying life insurance and how to avoid them