Group insurance for
MSBA members

How to Get a Life Insurance Policy

Making the decision to buy life insurance is relatively easy. Deciding how to buy it is a different matter.

Because the products and the structure of the policies vary so widely among different insurers, MSBA wants to make it simple for its members to make informed comparisons.

Consumers now have several ways to obtain life insurance coverage: through the mail, from an agent and over the internet. While each method offers some advantages, the products that offer a combination of convenience, affordability and reliability are typically the best insurance value.

Buying through the mail

Few options can match the convenience of purchasing life insurance through the mail.

Consumers initiate the mail order process, by requesting a comprehensive information package from the insurer. With the information in hand, they have the flexibility of reviewing plan details at their leisure-and the time to decide which is the best coverage for their family.

Enrollment is made simple, too. Typically, consumers are asked to fill out a brief form and answer some basic questions. After the application is mailed in, the insurer determines the applicants' eligibility, issues the policy and receives the premium payment.

A primary advantage of buying life insurance through the mail is that it preserves the consumers' privacy: No agent calls or visits the home to pursue a sale. If assistance is required, consumers can call the plan's toll-free number to talk with a plan representative.

In addition, because consumers are facilitating the purchase themselves, costs to the insurer remain low and the savings are passed on to the customer.

Buying from an agent

For many years, the only option consumers had when purchasing life insurance was to go through an insurance agent. Though new avenues for purchases exist today, the traditional agent structure is still integral to the industry.

Some consumers find it comforting to buy insurance from an agent because they want to develop a relationship with the agent and get individualized assistance for their needs. Agents are able to differentiate the benefits of various coverages for their customers, and help them select the coverage best suited to their needs. Agents may also be licensed to sell products beyond insurance, which broadens the value of their relationship with their customers.

While customer-agent relationships often do develop, the high turnover rate among agents means there is a good chance the person who sold the policy may not be there to service the account. And, consumers should realize that buying insurance through an agent is typically the most expensive approach.

Buying over the internet

Today, technology has ushered in a whole new way of selling-and buying-life insurance.

Consumers now have the choice of buying insurance directly, through toll-free telephone numbers or through websites. By calling a number or accessing the site, consumers can gather information on pricing and coverage of different policies. (Usually, consumers obtain information to make purchase decisions but cannot make the purchase over the internet; they must still talk with an agent and have a physical exam before a policy is issued.) These direct methods operate on a no-load or low-load basis, meaning the consumer will have to pay little to no commission when the purchase is made.

The lowest price options often come through quote services, which basically offer low prices and little or no advice. This option is best suited to consumers who have done their research and know exactly what coverage they want. Quote services can often offer the lowest prices in the industry, but they quote the lowest rates for consumers in preferred categories: nonsmokers, good health, etc. If consumers don't fit the preferred profile, they likely will not qualify for the lowest rates.

Consumers who want a good price but need some advice may opt to contact a low-load carrier. These companies are often a middle ground between personal agents and quote services. Unlike the quote services, which may staff their phone lines with sales representatives, low-load carriers hire licensed agents to answer consumers' calls and offer a measure of guidance in the selection process.

The low-load services often screen consumers more thoroughly over the phone than do quote services, so that consumers can get a quote on the product they need and qualify for the first time out. Often this represents a desirable compromise of cost-to-advice for the consumer, though low-load services may not always be less expensive than full-commission products. The largest insurers, because their tremendous volume, still may be able to offer better rates on some products.

And consumers should note: Both quote and low-load services generate some level of fees, and agents or representatives may still have a vested interest in "pushing" a particular product on their company's behalf.

The MSBA option

Now MSBA members have an exclusive opportunity to buy life insurance from a trusted source. For more information on any MSBA-sponsored plans, including Term Life, call toll-free 1-800-501-5776.

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Making a life insurance purchase

Here are some important things to consider when purchasing life insurance:

• Be sure that the agent and the company are licensed by the state.
• Understand the policy being purchased. Resist strong sales tactics and pressure to buy. Ask questions.
• Ask about "healthy lifestyle" discounts, such as nonsmoking rates, to save money on coverage.
• Be thorough in the medical history section of the application to ensure that future claims are not denied.
• Read the policy thoroughly and understand its contents.
• Look for the policy to be delivered within two weeks, or request an explanation from the insurance company about the delay.
• Look over the policy during the initial "free look" period. Be sure the policy is as expected.
• Make the check for the premium out to the insurance company, not the agent. Request billing on an annual or semiannual basis to reduce overhead costs.
• Tell beneficiaries about the policies and where they are located.
• Review policies periodically (every two years or so) to see that they meet current needs. Be cautious if asked to cancel current policies and buy new ones.

- Last Updated 9/28/03 -