The Insurance Salesman

This post is a great example of why I think a blog like mine is necessary. I want to give you a little insight into the life insurance industry and why I have a problem with the way it works. The insurance industry thrives on keeping people in the dark. They make a lot of money off of people knowing only exactly what they want them to know. In many cases you could be paying way more than you should for insurance just because you did not know how the insurance industry works.
For the most part, it does not matter where you buy life insurance. Insurance, by definition is fungible. Fungible means that it can be easily replaced or interchangeable. Grain, gasoline, or a US dollar are examples of fungible products. One dollar is the same as another dollar. A bushel of grain is the same as another. The same goes for gasoline, although there are different grades. The same principle applies to insurance. You are entering into a legally binding agreement with a company to pay you in the event of a loss. That agreement, assuming the terminology is the same, would be the same regardless of what company you entered that agreement with. That means that even though Northwestern Mutual or New York Life have really nice buildings and commercials with a really happy family that seems to be very secure with their finances, they are really offering you nothing more than another company. These companies thrive by you not knowing the prices that the other companies are offering. They thrive on making it look like they have more to offer you than another similar company. I said for the most part though because it matters who you are buying it from. You will at some point need to talk to a person, so you should make sure it is someone you can personally trust, and someone who is going to answer you when you have a question.
Suppose someone wanted to grow up to be a life insurance agent. What would they have to do to prepare for that career? 4 years of college? A series of tests and exams? Months or years of extensive studying and training? None of that is actually necessary. They would get hired by a company that sells life insurance, be given a cheat sheet for the state exam, and be selling insurance 2 weeks later. This is not meant to insult the intelligence of life insurance salesmen, I am sure there are some very quality life insurance salespeople out there. I just want to point out that I believe they are not adequately trained for the responsibility they are trusted with. You would not want a doctor that had received a day and a half of training advising you on your health, but the insurance industry thinks that someone that has had a day or two of training can adequately advise you on protecting your hard earned income. They are however adequately trained on how to get you to sign up and how to get you to buy something when you probably do not have all the information that you should have before making such a significant purchase.
Most people do not really know how life insurance agents are paid. Remember, I am speaking from the experience of working for multiple life insurance companies. The standard commission for life insurance agents is that they will get paid half of what the life insurance premiums add up to for the first year. That means that if you are paying $100 a month for your insurance policy the agent will get paid $600 for that sale. That is not including any bonuses. If a life insurance agent is just starting out there is a good chance that the bonuses will double that amount that they are paid. Why should you care? Because you are the one paying their salary. The amount that they are paid is directly reflected in the amount that you will be paying. This also means that life insurance agents are paid based on how much you are paying. So their livelihood oftentimes depends on selling you something that might be pricier than it should be or more than you actually would need. This is not meant to insult the character of insurance salesmen, because I think its very possible to find someone who will have your best interest in mind. I just want to point out that they do have that incentive to sell you as much as they can.
I will have a lot more to say about this topic in the future. I will point out tips on how and what you should be buying and where you should go to do so. I just wanted to point out how the industry is taking advantage of people oftentimes.

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