Getting the Best Deal : Case Studies

Getting the Best Deal : Case Studies

If you are like me, anytime you are told that you will save money by taking a certain action, your initial instinct, voiced or not, isprove it!”

It is in this vein that, through case studies, I will show how working with an experienced independent agent saves money.

Additionally we will quantify the amount saved in real dollars , not exaggerated claims.

Case study 1- captive vs. independent

When you work with an Agent who is “captive” as opposed to independent, that Agent may not be able to offer policies from carriers that compete with his employer.

Captive

Independent

If, however, he can use other carriers, he is incentivised not to. This is because compensation in a “captive” environment is tied to the agents production with the employer.

So, loyalty tends to be with the employer’s product (and  the Agent's pocketbook) rather than the best deal for the client.

" Independence is Happiness"

Susan B. Anthony

The following case study demonstrates the situation a client faces with a “captive” Agent.

Male

Best Class

20 Year Term

50 yrs. old

Non smoker

$500,000 

Using the above terms we look at  ten quotes from highly rated carriers (see AM Best Ratings ). The first several  are among the best priced available. the bottom few are among the most expensive. Lets see what we get:

Carrier

Mo./Yearly Payment

 protective

$ 77/mo. 893/ yr.

 lincoln financial

$ 79 mo. 900/yr.

 banner

$ 79/mo. 900/yr.

 north american

$ 79/mo. 900/yr. 

 american general

$ 78/mo. 904/yr.

 principal

$ 80/mo. 910/yr.

 transamerica

$ 79/mo. 920/yr. 

 mutual omaha

$ 85/mo. 977/yr.

 prudential logo

$ 89/mo. 985/yr.

 sbli express

$ 96/mo. 1104/yr.

So there is a  difference between the first and ninth quotes shown (22%). Additionally if you average the prices of quotes 7,8 &9 they more than 15% higher than the best quote.

So. if the agent you are working with is limited in the number of carriers he can offer, or is ethically challenged, you will pay significantly more than you need to.

Cost, however, is not the whole story....

Among the four best quotes there are carriers with outstanding permanent policies you could convert to without a new medical test. Having this option available might be worth a dollar or two a month to you.

However, unless you work with an experienced independent agent you wouldn’t be likely to have this information available.

Key Take Aways

  • Access to more carriers will result in better pricing.
  • It may be worth paying slightly more if there is a strong permanent conversion product.
  • Only independent brokers have the freedom to offer the best deal at all times.

Be an Informed Consumer    

Get Your Free Life Insurance Buyer's Guide 

Next, instead of pretending everyone is in perfect health, (a bait and switch tactic of advertisers), lets do a comparison where the customer is overweight (5'6", 210 lbs.) and quit smoking 16 months ago.

Feamale

Mult. Classes

20 Year Term

44 yrs. old

Recent Non smoker

$500,000 

This time  we will list eight  highly rated carriers:

Carrier

 Payment/ Mo. 

 mutual omaha

$ 66/mo.

 protective

$ 69/mo.

 american general

$ 69/mo.

 banner

$71/mo. 

 principal

$ 72/mo.

 lincoln financial

$ 73/mo. 

 prudential logo

$ 100/mo.

 transamerica

$ 194/mo.

Note that the top four are all less than half the price of Transamerica. The reason is that TransAmerica considers you a smoker until you have been not smoking for 2 years.

The order would change again if our applicant was more overweight because some carriers like -Lincoln comes to mind- have what are called "Table Shaving Credits" that can upgrade a rated policy to standard. This is important, as each "table" adds 25% to the cost. .  

Additionally, there are policies not listed that charge a premium for a no exam policy. While more expensive than most, the benefit of no exam is worth it to some applicants.

Key Take Aways

  • Different carriers look at specific risks differently.
  • Carriers have different rules and use different  criteria for deciding what is a risk (like smoking history). 
  • Only independent brokers have the ability to offer all of the carriers needed to get the best deal.
James Tobin, CFP
 

Jim Tobin is the owner of Life Insurance Help Desk, a Fairfield County, CT. life insurance agency. You can find him on Google + and Facebook. Over the past 10 years, Jim has used his CFP-financial planning designation to help individuals with their life insurance needs. In addition to working with life insurance clients, Jim teaches ESL classes in his spare time. He resides with his beautiful wife Nicole and the 3 cats that rule their lives..