Test Your Life Insurance Agent's Aptitude

Outsmart and quiz your life insurance agent to ensure the lowest insurance premiums for the best coverage.

Regarding your life, are you protected from the unexpected? Is your life insurance coverage worthless or worthwhile? How can you evaluate a prospective life insurance agent’s adeptness while weeding out the “sales agent” who is looking to make a fast commission? The answer is -- ask the right questions.
For starters, when you shop around for insurance, downplay your consumer intelligence. By acting as the uninformed customer, you will determine the expertise and credibility of an agent. Your introduction questions should begin with the following:

“I’m shopping for life insurance. I don’t know how much I need can you tell me?”

If the agent quickly gives you an answer without asking you any questions, then you might be dealing with an insincere agent. The amount of insurance that you should own is subjective. Many insurance experts and analysts consider 8-14 times the amount of annual earnings appropriate; however, it depends on an individual’s particular situation.
Life insurance is based on four key factors: age, health, occupation and avocation. How much insurance a person needs relies on the affordability. Most importantly, a life insurance policy should replace at least a portion of income. Then, it should cover the mortgage. Thirdly, children’s education costs, emergency and funeral expenses should (funeral, etc.) be a part of the calculation. Often multiple income analyses can determine how much life insurance a person needs and the premium affordability on a monthly, quarterly, or annually basis.

“What type of life insurance coverage do I need?”

Once again, the type of coverage depends on your situation. A perceptive agent will recommend a combination of both term and whole life to the total of insurance you need to cover your family. If you are older, and have a savings, 8 -11 times your annual salary should be adequate coverage. If you are younger with very little savings, 12-14 times your annual savings should be enough. If you only need insurance for a short period-of-time, then a term insurance policy is appropriate.

“What is the percentage of pay outs for term and permanent life insurance policies?”

In general, about one percent of all term insurance policies are ever cashed in. Most people live much longer than they can afford to pay for term insurance premiums. Additionally, only one in five permanent life insurance policies are in effect after 5 years. For death benefits, only one percent of all term insurance benefits are ever paid to the insured's family. An expert insurance agent should know and share their company’s insurance payout statistics.

Other questions to ask a prospective life insurance agent include:

For the most part, premiums are fixed; however, they can increase. Ask the life insurance agent:

“Are there advantages to the death benefit and cash value policy?”

The cash value and increasing death benefit offer the ability to cease payments on a policy after a period. Cash value is the interest earning section of a whole, variable, or universal life insurance policy. A portion of the annual policy premium goes to the cash value and earns interest. Moreover, money can be withdrawn from a permanent life insurance policy. As a life insurance policy matures, premiums can increase to be excessive for individuals in their 50's and 60's. Conversely, the advantage of term insurance is it can be converted to whole life insurance. A knowledgeable life insurance agent can help select a policy that is geared for a financially secure future.

Inquire about your life insurance agent’s educational credentials.