No Load Life Insurance
No-Load Life Insurance is not another type of life policy. It’s simply a term to describe policies being sold by insurers directly to the public. The middleman agent is bypassed and therefore no commissions are paid to a salesperson.
Some claim that no load policies are a myth because there is no such thing as life insurance without costs. These people don’t realize that it’s only the agent’s commission component which is being deducted from the rest of the costs. Your premiums will still include the costs of insurance and other administrative fees and charges, just not the agent’s commission.
No load can result in large savings since the sales agent’s commission can be as large as 80% in the first year of many whole life products.
Is it better to use a sales agent?
Many state the benefits of lower premiums are outweighed by lack of service and advice. Since there is no agent involved, you are left on your own to deal with the insurer directly. As with any financial product, without research or proper guidance, there is a potential risk you could make the wrong decision and end up either purchasing the incorrect policy or being under or over insured.
Insurance sales agents can help you make purchasing decisions. However, there have been complaints about salespersons selling more coverage than required in order to boost their commission. This is understandable considering their livelihood depends on making sales. Agents have also been known to overestimate build-up of cash value in certain whole life investment policies. So, you may not only be paying for more insurance than you need with an agent, you will also be paying their commission.
In some circumstances, salesperson can even HELP you make the wrong decision. For example, some simply calculate your policy face value by multiplying your income by a number of years. This does not take into account your family’s actual needs, whether now or in the future.
Not everybody has the same requirements. How does the agent know how many dependents you have, how long they need protection for or even whether they have a disability? Multiplying earnings is a simple calculation which could cause unintended hardship for your loved ones in the event of your death.
So what should I do?
Whether to buy no-load should not be your first consideration. You should research yourself how much coverage you will actually need. There are many tools online to help you make this calculation.
In most cases of lower income families, term life insurance is the most advisable option because it has the best value in terms of coverage per dollar. All you need to know with term is how much coverage you need and for how long. Then you can simply buy a no load policy yourself to save costs.
If you would like to use your policy for investment to build cash value and you have the ability to fund these types of whole life policies, then you are best to seek guidance from a qualified financial advisor rather than a sales agent. The advisor will evaluate your whole financial circumstances, needs and goals to recommend the most appropriate policy. Then it is up to you whether you wish to purchase a no load product, depending on whether you prefer to save the commission or whether you’d like to have some customer service.
Once you find out the type of policy and the amount of insurance you need, obtain some quotes to compare premiums. If you are uneasy about the “self-service” factor of buying life insurance without an agent, you can always ask how much commission is actually paid. Is it only the first year of the policy or do they get a percentage from each premium? You may find you are willing to pay the agent’s fee to get that additional customer service.
Before buying any policy, whether no-load or through a sales agent, always make sure to examine the carrier for financial stability.