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Cheap Life Insurance Can Cost You More in the Long Run

Life Insurance

What’s the most important factor when it comes to buying life insurance? For most people, the answer is cost and cost alone. Most folks are looking for cheap life insurance. No one wants to overpay for their life insurance. And I certainly don’t blame them.

But there are a few other factors to keep in mind. In fact, trying to save a few bucks on your premium could cost you big time down the road. When it comes to cheap life insurance, the advice your daddy used to tell you, “you get what you pay for” definitely has a place here.

Before diving in, let me just say, I’m in favor of getting the best coverage for the least amount of cost. I’m not promoting paying high premiums. But know that “cheap” life insurance can come with a hefty cost. For example, I can’t tell you how many people I have sat with who swore they have full coverage, only to discover their policy only covers certain forms of accidents. It’s a good thing we found out when there was still time to fix it!

So why the addiction to pricing? Spend five minutes online searching for life insurance and you’ll know why. Every major carrier and broker pushes the pricing model with quick quote calculators and even pricing examples for 25-year-olds in perfect health. While there’s nothing wrong with using a calculator, the net effect of this marketing emphasis on the minds of consumers is that pricing is the ONLY factor that matters…and that’s just not true.

Look Out for These 3 “Cheap Traps” from Cheap Insurance

There are a number of potential “cheap traps” you should avoid that are associated with this tunnel vision approach. And they don’t all have to do with price. Buying cheap can cost you in many ways, including time, service, benefits, expertise, and more. Here are three areas where these traps can show up.

#1 – Cheap Life Insurance Trap: The Insurance Carrier

First, each plan is underwritten by an insurance carrier. And if you’ve ever worked with a big company with bad customer service, you know how important that is. What are their reviews? How agreeable are they to pay out claims? Will they allow you to increase or convert your policy when you approach the expiration? How eager and willing are they to help you with changes, updates, and answer questions about your policy?

Your agent is your initial relationship and can help you along the way. But agents can come and go. The long-term relationship will be between you and your carrier. They’re the ones servicing your policy. And they are potentially the company that will cut a large, tax-free check to your spouse if you pass away. It’s a lot to leave in the hands of a company you don’t know much about.

#2 – Cheap Insurance Online: The Insurance Plan

The next cheap trap is the plan itself. There are as many plans as there are carriers on the market. All plans are not created equal. Some include a large number of exclusions. Others include enormous additional benefits. What types of riders are available? Does your plan payout if you don’t die? Are your rates guaranteed to not go up over the years? Does your plan require blood work? Did your agent explain the difference and the risks associated with each type?

Let me remind you that the worst time to find out that you don’t have what you think you had is when you need to file the claim on your policy. It could leave your family in a tough situation at a very critical time in their lives. 

All to save a few bucks a month.

RELATED: Term vs Whole Life Insurance: Let’s Break it Down

#3 – Cheap Insurance Quote: The Insurance Agent

Finally, the wrong agent cheap trap can cost you dearly. Most people trust their agent, otherwise, why would they do business together? But that doesn’t mean your agent is trustworthy. Good or bad, you’re likely to go with what they put in front of you. Have you read their reviews? Have you checked out their website and consumed some of their content? How responsive are they? Do they check up on you at least once a year? 

Typically, a life insurance agent is paid on commission. If he is a “captive” agent, he represents one carrier and one line of products. Likely, he’s paid by salary plus commission. If the agent is “independent,” he makes his living 100% on the commissions of the policies he writes, which can be good or bad for you.

RELATED: Independent vs. Captive Agents- What it Means When You’re Looking for Life Insurance

A commissioned agent will have to work harder for your business. On the flip side, an agent may recommend a certain type of policy or plan because it provides a higher commission. She may leave out some things just to make a sale. If an agent recommends a policy solely because it’s the cheapest price, it’s time to find a new agent. And since the commission is paid, your agent may move on to the next sale, leaving customer service for the birds.

The truth is, all insurance companies run on math. And no matter where you go, 2+2 will always equal 4. Carriers follow formulas. They’re in business and have to operate at a profit. Therefore, there’s typically not an enormous difference in price from carrier to carrier. It’s like shopping around for gas. Sure, you may be able to find a gas station offering unleaded for 10 cents lower, but is it worth the 20-mile drive to get there?

When you’re shopping for life insurance, the best advice I can give is to shop instead for the right agent. Many agents have access to a similar group of carriers. But the right agent will have your best interest at heart and educate you on recommendations that are in your best interest. Of course, price is a factor, but it’s only one of many that should be important to you. The right agents know their plans and their carriers and are able to answer your questions and provide research that helps you make an informed decision.

If you’re looking for an affordable plan with a fantastic carrier, solid benefits, and competitive rates, let one of our agents educate you on your best options. Or maybe you have a policy already and would like a second set of eyes to make sure you have what you think you have with the best coverage and best pricing. Either way, reach out for a fast and free quote- we look forward to serving you. Our “cheap insurance quotes” are affordable AND personalized!