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Life Insurance Today: The Realities

  • When thinking about life insurance, consider three realities:
    • Life insurance is one of the most complicated financial products available today.
    • Most people do not like to think about life insurance, and like drafting a will, often procrastinate in addressing this topic.
    • The life insurance industry is dominated by commission-based providers.
  • Even the most well-intentioned insurance agents suffer from an inherent conflict of interest because they are compensated based on what they sell.
  • Without an advocate that is looking out for their best interests, insurance consumers are at the mercy of their insurance agents and the companies represented by those agents.
  • Consumers have few places to turn to for unbiased advice.

What are fee-only life insurance advisors?

  • Fee-only life insurance advisors are true fiduciaries, providing independent, unbiased advice.
  • These advisors receive no other form of compensation other than the hourly fees paid by their clients.
  • They do not receive compensation from insurance products that their clients may decide to purchase, nor do they receive any financial incentives from steering clients toward a particular agent or company.
  • Other than providing clients with the most knowledgeable and expert advice possible, fee-only insurance advisors have absolutely no vested interest in the insurance decisions their clients make.

Why do I need fee-only life insurance advice?

  • With the growth in personal financial products and providers available, it's more important than ever to work with an advisor free from conflicts of interest.
  • Life insurance is complicated and you can not trust that an agent with an inherent conflict of interest is doing what's best for you.
  • Consulting with a fee-only life insurance advisor can save you money, offer you a wider variety of options, prevent purchase mistakes, help maximize long-term policy value, improve how your policies are serviced and provide you with peace of mind.
  • Consulting with a fee-only life insurance advisor means you will get advice based on what's best for you because these advisors do not have a financial stake in the decisions you make.

How does fee-only life insurance counsel work?

  • A fee-only life insurance advisor's compensation is based only on time, such as an hourly fee, not what's sold. They receive no commissions or incentives.
  • Most fee-only life insurance advisors focus on a clientele that is planning to purchase or re-evaluate a permanent life insurance product.
  • The fee-only advisor works with the client to gather the required information. The advisor then researches a variety of available options and presents the information to the client. If the client elects to purchase life insurance, then the client will purchase the insurance directly from an agent or company with the fee-only insurance advisor monitoring the process from start to finish.
  • Typical engagements last between 5 to 15 hours. The simplest of cases takes a minimum of two hours.
  • Typical clients for fee-only insurance advisors include:
    • Individuals considering the purchase, replacement, termination, or sale of a policy
    • Professionals such as estate planning attorneys, financial planners, accountants and insurance trust trustees
      • Adding a fee-only life insurance advisor to your client team adds value, credibility and strengthens your client relationships
      • Using a fee-only life insurance advisor also assists professionals in meeting fiduciary and ethical obligations to clients
    • Business owners who offer life insurance as part of their compensation or benefit plans, or need to use life insurance for other business purposes

Scott J. Witt, FSA, MAAA has over 18 years of experience as an Actuary in the Insurance Industry. He maintains the highest actuarial designations, FSA (Fellow of the Society of Actuaries) and MAAA (Member of the American Academy of Actuaries).

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