If you’re considering buying term life insurance, you’re in good company. Level-premium term buyers tend to be more mature, better educated and better-heeled than the average life insurance buyer.
By Mary Pollman – SelectQuote
It’s counterintuitive. Term insurance is the least expensive form of life insurance. You would assume that would mean its buyers were, on average, younger and poorer. The product is simpler than permanent life insurance policies. So you might think that meant buyers would be less sophisticated.
You would be wrong.
For almost 20 years, I worked for life insurance companies that sold low-cost level-premium term life insurance. And for those 20 years, the profile of the average buyer didn’t change much. He (the ratio of male to female buyers was 60-40) was not who you might think. He was not in his 20s or 30s, not in his first job, or first house or having his first kids.
The average age was around 42. Our clients’ children were usually high school age. The term coverage was often purchased to make sure the kids could afford to go to college, no matter what. Or it was there to secure the bigger, fancier roof over this upwardly mobile family’s head. Or the term policy was there to cover the entrepreneurial bets of our successful client.
Compared to the buyers of my company’s permanent life insurance policies, our term buyers were more likely to be business owners, professionals or managers. They were better educated, made more money and had a higher net worth.
Why should this be so? Why would people who can afford to spend more pay less than the average person on life insurance?
I suppose there are dozens of reasons. For one thing, these folks usually had more financial savvy. They could make up their own mind about life insurance – sometimes contrary to the advice they’d get from their neighborhood insurance agent. The commissions on term don’t give most agents a lot of incentive to recommend it.
The term buyer often has a clearer picture of his or her financial future. Term typically is purchased for 10, 15, 20 or 30 years. The buyer has to be able to imagine what his life is going to be like up ahead and what the risks will be. What is the likelihood that the kids will actually graduate in a normal time period, will actually move out of the house when they’re expected to, that the business will grow according to plan, that your partner will really want to buy you out? This simple product poses some important and sometimes complicated questions.
There is a sizeable group of term buyers who have bought into the buy-term-and-invest-the-difference philosophy. Instead of paying a big chunk of a life insurance premium into a cash-value side fund, their plan is to just buy the coverage – i.e., buy a term policy – and see if they can earn more than the insurance company would have paid on the cash value. In most economies, they would probably win that bet, if they have the discipline to actually make the investment. (I wouldn’t put a wager on my following through, but our term buyers were the kind of folks who would probably have more discipline than I do.)
It’s also possible that well-heeled, well-educated term buyers simply have more imaginative plans for their money. They want to sock away as little of it as possible in necessary but – let’s face it – pedestrian stuff like life insurance.
About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.
Get the best of both worlds with SelectQuote. Lots of term life insurance quotes. Personal expert advice. With SelectQuote, you can get plenty of price alternatives, all from highly rated life insurance companies. And, because you’ll be working with a SelectQuote Licensed Expert, you’ll know these are deals you’re likely to actually qualify for. Call us today, toll-free – 1-888-739-7965 . Or go to our website, www.selecquote.com/home9
Tuesday, March 18, 2008
Who buys cheap term life insurance? The well-to-do!
Tuesday, January 15, 2008
Term Life Insurance Quotes: Can You Rely on Them?
One of the reasons you consider term life insurance is because you’re smart about prices. Term quote sites can show you lots of them. But are the prices they show anything like the price you’ll ultimately pay?
By Mary Pollman – SelectQuote
It’s easy to get term life insurance quotes online. If you Google “term life insurance quote,” you will get 311,000 search results. But can you believe the quotes you see on all those sites?
I went to five term life insurance quote sites, and the number of quotes I received varied widely from site to site. One offered 9 quotes. One offered 57. The price ranges were about the same. At my tender age, for $500,000 of 20-year term, the range was $97 a month to $123 a month. I had modestly entered “super-preferred” or “preferred plus” on all the sites when they asked about my general health/risk category.
The numbers are interesting, but frankly they’re mostly a come-on. To actually get any of these policies, I would have to fill out a full application and have a paramedical examination. An underwriter who worked for the insurance company would look at all the information and probably also check my records with the MIB (Medical Information Bureau, an organization that collects data for the insurance industry) and the Bureau of Motor Vehicles. Then the underwriter would decide whether the company would offer me a policy and, if so, at what price.
If the underwriter doesn’t think I’m eligible for that “super-preferred” rate, my online quote will have meant nothing.
I’m a big do-it-yourselfer, and I don’t like giving personal information online unless I really trust a site. So, shopping for term life insurance, I would probably make a quick visit to one of those anonymous quote-factory sites to get a broad notion of prices. But I would go back to their input screen two or three times, first indicating I’m “super-preferred” to see what those quotes look like. Then I’d go back and enter “preferred” and run the quotes again. Then I’d enter “standard” and check those quotes. That way I’d cover the waterfront and protect myself from sticker shock.
Because I’m a smart shopper, my next stop would be a site like SelectQuote.com. After I have a broad general notion of price, I want to get a realistic idea of the specific price I’ll be charged. And the best way to do that is to work with a person who knows what the life insurance companies and their underwriters are going to be looking for. Someone who can tell me which companies might actually consider me “super-preferred” and which wouldn’t. Or, if I smoke, someone who knows which companies have the best deals. Or, if I’m not in good health, someone who can steer me toward the companies that are most likely to consider insuring me. That someone is, in my opinion, the big plus that SelectQuote offers.
The other thing that a person can communicate much better than a computer screen with 57 quotes, is a sense of the character of the companies offering these prices. Many of the best term life insurance companies are not big brand names.
So, in summary, if you’re smart enough not to get attached to a specific quote, it’s okay to check the sites that will show you dozens of them. But if you’re really serious about getting the best price on life insurance from a quality company, don’t spend much time there. Go to a knowledgeable, helpful human being you can deal with online, by phone or face to face.
About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.
Get the best of both worlds with SelectQuote. Lots of term life insurance quotes. Personal expert advice. With SelectQuote, you can get plenty of price alternatives, all from highly rated life insurance companies. And, because you’ll be working with a SelectQuote Licensed Expert, you’ll know these are deals you’re likely to actually qualify for. Call us today, toll-free – 1-888-739-7965 . Or go to our website, www.selecquote.com/home9
