Facts About Life Insurance

Why to use a Fee-Only Life Insurance Advisor--and not an agent--to help you find the right life insurance products for your needs.

Frequently Asked Questions

Who benefits from this website?
  • Prospective life insurance buyers
  • People with underfunded life insurance
  • People with overpriced life insurance
  • Businesses that need complex insurance analysis. 
  • Lawyers and other fiduciary advisors who have such clients. 

Generally, people seek out Fee-Only Life Insurance Advisors when, as one commented, ". . . they're battered and bloodied by misdeeds of insurance agents."   They may also feel like they or their clients are spending too much.  In fact, a well-known tax lawyer recently told me that that insurance agents generally ". . . present a larger bill than the lawyers who do the heavy lifting."

I told him our goal is to educate lawyers to use Fee-Only Life Insurance Advisors early on in order to reduce the retail commission to a wholesale one, and make the insurance transaction one that is controlled by lawyers and fiduciaries rather than agents.

 

Who should use a Fee-Only Life Insurance Advisor?

Any individual who has— or is considering— life insurance:
  • Financial and estate advisors, including accountants, attorneys, investment managers and benefits consultants.
  • Business owners and executives.
  • Trustees

Why should I use a fee-only life insurance adviser? 

Life insurance agents have a conflict of interest since they only get paid if you buy a policy.  Because of this conflict, agents cannot, by definition, be fiduciaries.

If you hire a Fee-Only Life Insurance Advisor, you're hiring a fiduciary who is ethically bound to give you objective analyses and recommendations for current and future life insurance.  You won't leave your family under-insured and your budget a hostage to excessive life insurance premiums. 

A Fee-Only Life Insurance Advisor will offer you true expert opinion which is not motivated by a commission based on the amount of product sold or the amount of insurance you own.  If you're a lawyer recommending a Fee-Only Life Insurance Advisor, you'll also be extending your fiduciary commitment to your client—as well as building a relationship with a go-to expert for the next client that needs life insurance help.


What is a "fiduciary"?
A fiduciary is someone who has a legal or ethical commitment to work to the best interests of their client, and their client alone.  For example, attorneys, CPAs, and licensed financial advisors have a legal fiduciary relationship with their clients.

I already have a certified financial planner and CPA who oversee my investments, including insurance.  Why do I need a Fee-Only Life Insurance Advisor?
Because most financial planners and CPAs don't have the necessary insurance background and expertise to understand how to optimize your insurance investment.  But the right Fee-Only Life Insurance Advisor will work with you and them to make sure you have the right insurance products, risks and costs to meet your financial planning and estate goals.

What's the difference between "fee-only" and "fee-based"?
A Fee-Only advisor's only compensation comes from the fees he charges his clients.  A "fee-based" advisor may charge fees, but may also receive commissions or compensation from brokers, insurers or other parties.

How do I find a Fee-Only Life Insurance Advisor?
  • Check my Links to Advisors page for referrals to advisors I've worked with and recommend.
  • Or Google-search "Fee Only Life Insurance Advisor"


How are most clients currently getting information about life insurance?  

All too often from life insurance agents who are incentivized by commission income—and not, necessarily, by finding the best life insurance product or value for the client's needs.  And since many fiduciary advisors don't have life insurance expertise or ready access to life insurance illustrations of proposed or in-force policies, most life insurance transactions are almost always controlled by agents and companies—unless a Fee-Only Life Insurance Advisor gets involved.

 

So why don't more people use Fee-Only Life Insurance Advisors?

  • Most fiduciary advisors don't specialize in life insurance—and aren't aware of the services Fee-Only Life Insurance Advisors offer. 
  • Some fiduciary advisors even see insurance as beneath them.
  • Most fiduciary advisors allow insurance agents to control the transaction.
  • Most fiduciary advisors think it is rude to ask about commissions
  • Occasionally fiduciary advisors do seek second opinions, but from other insurance agents who offer a second, perhaps softer sales pitch.

 

What are two common life insurance myths that you want to dispel? 

That life insurance is a commodity.

Successful agents sometimes see all prospects as a nail that they have a perfect hammer for—and often fail to do the necessary work to answer the prospect's unique needs with the right life insurance product.  Each agent is further limited to the portfolio of products his company or agency represents.  In fact, not all companies, policies or prices are the same—nor is what's right for one person appropriate for his neighbor.   To get the right life insurance coverage at the lowest possible price, you need an expert who can help you navigate and objectively compare all the industry has to offer.. 

That commissions don't matter.  

They do—and the amount they vary and impact the final cost of a policy is staggering.  The securities industry began offering negotiated commissions in 1975.  About 1980, life insurers allowed agents to illustrate products with reduced commissions.  For example, one large company offers a policy with a level sales commission that is only 3% of the premium.  But that’s the low end: every state allows companies to commission agents at much higher rates—in New York up to 91% of the premium.  And that’s not atypical.  It’s important to remember that when a person buys life insurance, the money that doesn’t go in the agent’s pocket stays in the policy.

However, even though companies offer and sell them, reduced commission alternatives are rarely offered today because agents often discredit them as dangerous or lapse prone.  In fact, any life insurance product can lapse if it’s neglected by the owner.

New York state just enacted a regulation to require commission disclosure to life insurance buyers.  Agents and companies fought the regulation, and we expect litigation to follow in New York and other states since the commissions at stake are enormous.