Did I end up paying too much for life insurance? – II
Earlier this week, our blog began discussing how the practice of “upselling,” meaning getting people to purchase more than they intended, is rampant in more than just the consumer realm, including even the critically important area of life insurance.
In particular, we discussed how some insurance agents, eager to capitalize on a potential commission, might attempt to steer people toward purchasing more coverage than is necessary and examined one example of how this might occur. We’ll continue this exploration of how an agent may attempt to upsell you on life insurance in today’s post.
Sale of permanent policies
From variable life insurance to whole life insurance and universal life insurance, these types of coverage are intended to cover an insured for the duration of their life. Furthermore, they have an interesting tax-deferred investment element known as cash value, which enables the insured to borrow against the money, withdraw money from the policy or cash in the policy.
As appealing as this can be made to seem by an insurance agent, particularly to those with problems saving, experts warn that these types of policies are more complex and, by extension, more expensive.
Indeed, they indicate that if a prospective buyer knows they don’t need permanent life insurance or harbors any sort of doubt, they should avoid going this route and consider cheaper options (i.e., term life insurance, maximized retirement contributions and simple changes in spending habits).
Sale of policies covering others in your household
It wouldn’t be surprising, say experts, for a person sitting down with an overzealous insurance agent to be given a sales pitch about securing life insurance for someone else.
However, they also indicate that of all the forms of upselling, this one may actually make some sense. This is particularly true if the customer is married with children, as a simple term life insurance policy can offset the potentially devastating loss of one income.
As far as children are concerned, they indicate that it might make sense in certain situations, including those where they have been diagnosed with a serious medical condition.
Sale of riders
For those unfamiliar with this term, riders are essentially optional features designed to expand the scope of a life insurance policy — at a cost.
Experts advise prospective purchasers to thoroughly read any rider offered, and ask the agent to compute the price of the policy with and without it. Indeed, they advise calculating how much money could be earned by simply investing the money that would otherwise be spent on the rider.
Here’s hoping the foregoing discussion proves helpful for those looking to make the wise decision to secure life insurance.
Source: USA Today, “How to tell if your agent is trying to upsell you on life insurance” Barbara Marquand, October 22, 2016