How Do You Choose a Life Insurance Agent?

There is an easy way to see a if a life insurance agent knows what he’s talking about.  When any insurance agent comes to see you, or even when you see a stock broker, tell them to bring their own insurance policies or stock portfolio with them.  You want to see if they put their money where their mouth is, but you don’t have to tell them that.  You could just say, “It is important to me that the person I insure (invest) with believes in the products enough to own them themselves.”

Yes, you are being nasty in a sneaky sort of way, but hey, if the person doesn’t own the products himself you probably don’t want to have them as your agent, broker, or advisor.

Sure, there will be exceptions to the rule.  The agent might not own life insurance because he can’t medically qualify, or he might not own a mutual fund because he does his own stock investing.  But these will be the exceptions.

And you know what? More times than not you will find that the agent or broker doesn’t own what he is telling you to buy.  And when that happens, help them out; turn the interview around, and take the sales interview intended for you and do it on them.  It’ll be the turning point of their career.

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How much life insurance should I have?

There are basically three ways to answer “How much life insurance should I have?”, and each method results in a substantially different amount of insurance.

The first method is probably the oldest method.  It is called “Human Life Value,” and it an idea that has become very popular among insurance agents and brokers in the last 10 years.  The basic point is that the economic value of a human life involves more than just replacing his income; it involves future salary increases, maintaining a standard of living for the family, and inflation.  Long-story-short: get as much as the insurance company will give you, which, depending on your age, is between 20x and 30x your income.

The second method is called “Capitalization of Earnings.”  The basic concept is that you are the goose (income earner) laying golden eggs (income), and when the goose dies we still want the same number of golden eggs.  For example, if you are earning $100,000 per year, how much money (insurance) would it take to generate $100,000 per year?  The answer depends on the interest rate earned on the deposit, but for an example, if you earned 5% you would need $2,000,000 to generate $100,000 per year.  So, the amount of insurance is $2,000,000.

The third method I call the “Transition Approach.”  The idea is that the surviving spouse can earn a reasonable living, and the insurance is just there to help clean up the financial affairs, pay off loans, and give the spouse some breathing room.  Paying off the mortgage and any credit cards would be a big relief to the spouse of course, as would putting some money aside for future emergencies (roof, appliances, etc.), college money for kids, and something to help for a year or two during the transition.  Obviously this isn’t a romantic approach, but then, finances are usually the first place where romance wanes.

Posted in Consumer Advice, Term Life Insurance | 1 Comment

How Do You Know if Your Life Insurance Agent is Good?

It is funny how much confidence people put into their life insurance while having no idea if the agent actually deserves that confidence.  There are a few things you can use as a yardstick to measure your insurance agent.

  1. How long has your agent been in the life insurance business?  Someone who has a lot of experience probably knows which types of policies have worked out over the years, and which ones haven’t.  He’ll also know that just because an insurance company has a life insurance product, it doesn’t mean it is a good life insurance product.  This is very important regarding life insurance policies that invest in the stock market.  An agent who has been in the insurance business for twelve minutes isn’t likely to be someone whose advice you would seek for investments spanning decades.
  2. Does your insurance agent represent more than one insurance company?  The only way your agent can find the best insurance policy for you is if he familiar with lots of different policies.
  3. Does the insurance agent have educational degrees specific to the insurance industry.  Not only does the education matter when it comes to advising you, it also means that the agent cares enough about being a professional that he has sacrificed his TV time to learn his field.

Just because an insurance agent works at your bank or has been recommended to you by Aunt Agnes, doesn’t mean they are competent.

Posted in Term Life Insurance, Uncategorized | 1 Comment

What is a “mutual” life insurance company?

Most insurance companies out there today are just like any other publicly traded company. They are owned by stock holders. When the insurance company makes money, the stock holders make money.  While this is inconsequential to those of us who have term life insurance, it does make a difference if you have a “Whole Life” insurance policy.

A mutual insurance company does not have stock holders. The owners of the company are the same people that own the life insurance policies. Depending on how much life insurance you own, you own that much of the insurance company.

One of the main benefits to a whole life insurance policy is its accumulation of cash inside the policy. You are actually paid by the insurer a portion of their profits. When you take out the stock holders, there is more money to go around and the faster the cash value in YOUR policy goes up! I know everyone can appreciate a little more cash.

There aren’t too many mutual companies left out there today. Some examples are Guardian Life, Ohio National, & New York Life. For more information on whole life insurance, send us an email.

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What is Key Man insurance?

Key man insurance has become a very important security measure for many companies doing business in today’s world. It is a common occurrence that there is one or more people in a company that are very important to that company’s success. Without that person doing their job, the company would suffer an extreme hardship.

In most cases this is an executive in a company. To prevent a situation where a company could have a large financial loss if a that executive were to perish, companies purchase a key man life insurance policy. This is usually a simple term life insurance policy with a guaranteed rate for either 10, 15, or 20 years. You can get a longer term insurance policy or even a permanent life insurance policy, but for cost reasons it isn’t done in most cases. This policy is owned and paid for by the company. The of the beneficiary of the key man insurance policy is the corporation itself.

You might be interested to know that almost every large corporation has a key man insurance policy on each one of their executives.

The process of getting a key man insurance policy is almost identical to the process of getting life insurance on yourself, with the exception of needing a few extra signatures than normal. If you have any questions on getting a key man life insurance for one of your employees, please in the comment section below. I am always happy to help.

Posted in Business, Term Life Insurance | 3 Comments

Buying Term Life Insurance

Buying Term Life Insurance Is a Smart Decision

What will happen to those who depend on you in the event of your untimely death? The fact is death is expensive, both in the funeral costs and in the aftermath of lost income. If you are in a position in which your earnings support others, it may be time to look into some term life insurance quotes.

The good news is that this is one of the simplest, most inexpensive kinds of insurance you can buy to protect those you love if something should happen to you. You’re actually financing the best immediate death benefit for the least premium expense. If you are preparing to start your own family with little ones to care for, you might consider buying a policy for yourself. On the other hand, if you are a single adult with no dependents and other sufficient financial sources, you might not really need term insurance right now.

However, if someone you love will be financially impacted by your death and loss of material support, getting a term life insurance quote just makes good sense. While it will not gain cash value as a whole life insurance policy does, your term life insurance policy will provide a specific payout at the time of your death providing you have not outlived it. Ask us about the different choices—straight term, decreasing term, annually renewable term, and Return of Premium term to find the best program for your family budget and needs. Peace of mind is worth a premium.

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