Two for the Price of One

Two for the Price of One

Your agent may not tell you about this life insurance option.

Ever heard of a low-load policy? Probably not from your agent. Here’s what Consumer Reports said about it in a 1993 report. “Low-load policies may not be in the best interest of agents, but they are in the best interests of consumers. That’s because these policies aren’t sold by agents. Instead they are sold by phone and through fee-based financial planners. They charge an overall fee but receive no commission on the products they recommend.

Long-load policies are a variety of the universal-life policy, which is really two products in one: simple term insurance, which pays off it the policy-holder dies, and an investment account that earns interest anc can be used to pay for the term-insurance. Consumer Reports says a 45-year-old man who needs $250,000 in coverage will pay about $3,700 a year for a good universal-life policy.

Your insurance agent typically earns 50 percent of your first-year premium, but low-load policies cut out the middle-man. They also keep other costs lower and impose no, or very low, surrender charges on policy-holders who eventually drop their coverage. That makes them a particularly good deal in the early ears and, Consumer Reports says, a good deal in later years, too.

Ameritas, John Alden, USAA Life Southland, and Peoples Security/Commonwealth offer low-load policies. For a fee, they will take applications for policies and arrange for necessary medical exams. Planners charge less an hour for their services.

Two for the Price of One. Photo: Elena

Shopping Advice from a Pro

Insurance consultant Glenn S. Daily’s tips for shopping for life insurance

Find out the financial strength of the insurance company you’re considering. Although rating scales differ, you are probably safe if you stay above an AA on all five rating companies’ charts. Use policy illustrations only to screen out inferior products. They aren’t reliable in comparing policies because they don’t show premiums, interest rates, or guarantees.

Focus on the costs. You can’t predict earnings, but you can better the odds for a good return by avoiding companies with a lot of overhead expenses, such as high commissions, broad expense account allowances, and large administrative costs.

Don’t equate premiums with price. Low premiums can hide high commissions spread over years.

Don’t switch policies unless your current policy is not performing well. Though something newer may look better, you will pay a second commission while your existing policy was probably earning a return.