It seems so simple. Type “cheap life insurance” in google and you get 24,300,000 hits. “No Exam Life Insurance!” “Rates from $4.80 per month.” Marketing can be so misleading. Lets look at the facts…
How your health affects rates- Insurance companies rate you based on a number of factors. Generally, if you are of “normal” height and weight, take no medications, don’t smoke and have not had any significant health issues in the past, you will probably get preferred. While companies may use different names, the rating categories (best to worst) are superpreferred, preferred, Standard Plus, Standard, and then rated.
Can I really get “Super-preferred?”- In fact we got a client this rating today, so it does happen. However, internet rates are often bait-and-switch– they promise you a low price based on this great rating, only about 5% will actually qualify! Why? To get this incredible rate, you not only have to be superhealthy- you also have to have no moving violations, and no history of cancer, diabetes, or heart problems in your family.
Why you need a broker- Rates are filed and preapproved with the state, and they are what they are. Everyone accesses pretty much the same rate database, so no one has a “better rate.” However, there are a lot of variables. Insurance underwriters look at illnesses differently, so a company may rate you standard for your problem, and another one might rate you standard plus – with a cost savings. Your broker will know that, and may have a little pull if you are on the fence between two rating categories.
What about the big name insurance companies? There are a lot of companies that use “captured” agents- they can only sell their employers products. They advertise a lot, to get people to know their names. Fact is, advertising costs money, and that tends to raise rates. Furthermore, since they only have one outlet, they can only sell you their product, even if its not the best one for your situation.
How different are rates between companies?
If we look at a 30 year old man, purchasing $500,000 of 20 year term insurance, here is the range of monthly premiums for 21 carriers:
Preferred Plus- $20-$38
Standard Plus- $33-$56
So, if you chose the right carrier, you could be at $26 a month, while another carrier might be $56 for the same coverage- because they rate you differently and have higher rates. This difference is similar across all ranges of age and coverage.
Speaking to a knowledgeable broker doesn’t cost you anything, but believing everything you read on the internet? It might!