One major decision to make when you’re planning on buying life insurance is the decision to get whole or term life. The names are pretty self-explanatory: whole life covers you for your entire life, term life only does so for a pre-determined length of time. Besides this, there’s a few other factors that can influence your decision one way or the other. As one might imagine, whole life is much more expensive, but also includes an investment portion, whereby a policy holder can take money out of their policy to use in retirement. Either option might make sense for the right individual, provided that the policy doesn’t include excessive surrender and liquidity charges, as many policies do, but brokers sometimes try to sell whole life policies over term life. Why is that?
The reason has more to do with the salesperson than the policy or the client. Brokers take an agreed-upon commission from each sale, and products that cost more, and therefore earn more for the insurance company, come with a larger commission. In addition, insurance companies sometimes throw in other incentives to brokers that sell a lot of profitable policies. This means that the broker can be seen as working for the insurance company, rather than the client. Whole life policies, which have much higher premiums than term life, are bigger paydays for the broker, and they sometimes sell that, rather than a more modest policy that would be a better fit for the client.
It’s important to read a policy carefully before you sign, and to make sure you understand how it will fit your specific needs. Make sure that your broker addresses any concerns you have with specific information about the policy, and strongly consider getting a second opinion from a financial advisor who doesn’t have a stake in the sale. If they can’t or won’t explain what aspects of the policy will be a good fit for your financial goals and plans, it might be a better idea to wait and find someone who can.
Major Sellers of Whole Life Insurance Include:
- Northwest Mutual
- New York Life Insurance
- State Farm Life Insurance
- MassMutual Life Insurance
- Guardian Life Insurance
If you do end up buying a policy that isn’t a good fit, or feel that you were misled by your broker, contact the Evans Law Firm for a free consultation about your situation. Our firm handles insurance, annuity, and investment fraud, as well as financial elder abuse, healthcare and nursing home fraud, and qui tam and whistleblower cases. We can be reached at (415) 441-8669, or by email at firstname.lastname@example.org.