From Insurance for Dummies by Jack Hungelmann

 As you get inundated with life insurance solicitations, do you ever feel that the first thing astronauts will encounter when landing on Mars will be a coin-operated machine selling accidental space-death insurance? There’s certainly no shortage of places to buy life insurance out there.

After you have determined how much coverage you need and the type of policy — term or permanent — that best suits your needs, you can search out the best place to buy what you need.

Considering an agent for life insurance

Permanent insurance is available almost exclusively from insurance agents. I recommend that you buy permanent insurance only from a top agent. Keep in mind that permanent insurance, due to its complexity and cash value element, requires added expertise in choosing among different products.

Buying term insurance is a completely different issue. Unlike almost any other kind of insurance, term insurance is close to a commodity. Term policies are the least complex policies you can buy. The policy boils down to one sentence: “If you die, we pay.” Because, unlike most other policies, there aren’t a lot of hidden exclusions, limitations, and other dangers, buying it direct, without an agent, is less risky than buying any other policy direct.

However, using an agent doesn’t cost that much more (if anything). I recommend using one, but separate the wheat from the chaff and pick only a skilled agent. Hiring the best won’t cost you a dime more, because all agents get paid about the same amount, determined by the premium you pay. A good agent can help you determine the right amount of coverage, determine the best type of term insurance product to use, set up the policy owner and beneficiary properly, and be an advocate for you if you’re having problems with the insurance company. A top agent can also help you choose a financially solid company that will endure. And finally, if your application is rejected due to health, weight, or other problems, a good agent can help you search for a company that will insure you.
As to possible sources of agents, life insurance is available from career life insurance agents whose primary occupation is the sale of life insurance, from the agent who helps you with your auto and Homeowners insurance, and from many financial planners.

Career life insurance agents

The principal advantage of a career life insurance agent is that life insurance is their specialty. They tend to have a higher level of expertise, especially if they have more than five years in the business. Life insurance agents who have taken advanced classes and earned professional designations, such as the Certified Life Underwriter (CLU ), are especially good bets.

Warning! Be careful of inexperienced agents, especially if you have complex needs. Many don’t last. The washout rate for life insurance agents is one of the highest of any profession — close to 90 percent in the first two years! Most new agents also have less expertise than experienced agents (unlike the rest of us, who were geniuses the first day on the job!). In many states, a person can legally sell life insurance with just a week’s schooling.

Tip. If you do work with a new agent and you have any concerns about what’s being recommended to you, get a second opinion. If you decide to work with an agent, you may get a lot of pressure to buy permanent life insurance when you’re asking for term life insurance. The dramatically higher commission that agents earn by selling permanent insurance compared to term insurance may be the reason. If the agent who’s “helping” you insists that permanent insurance is your best option when your need isn’t permanent, walking away from that agent may be your only option. But some real pros, who care about your welfare, may also believe that permanent insurance is the only way to go. After all, permanent insurance is always going to be there for you and your loved ones, as long as you pay the premiums.

There is no problem with buying permanent insurance, provided that you can afford the higher premiums for the coverage your survivors will need. What matters most isn’t the type of policy you buy; it’s that your survivors are well taken care of. The biggest problem is that most young people who buy permanent instead of term end up underinsured.