If I’m with a Good Company, Isn’t that Enough?

Some people are so convinced of how great their insurer is, that they cannot see any benefit from outside advice. Nothing could be further from the truth.

Perhaps the best way to illustrate this is by example. I just finished a life insurance review that illustrates the dramatic potential for improvement within the same company. This client was a little extreme for most of us: his income was higher and what he was asked to spend on life insurance may seem absurd (though it happens all the time). But it graphically shows what frequently happens, albeit often on a lower scale.

A Northwestern Mutual agent approached this newly practicing doctor earning a very strong income and recommended a life insurance policy as an investment. The doctor contacted me for a second opinion. The agent emphasized what an outstanding company he represented (true) and proposed a 3 million dollar policy costing 25k/yr with a surrender value of 3k at the end of first year. I suggested a variation with the same company: a lower death benefit, costing 12k/yr with a surrender value of 10k at end of first year. Over 12k less premium for 7k more value!

The gist of this recommendation was to shelter money in an investment that would be exempt from a medical malpractice lawsuit. Whole life cash values fall in this category. The thing to keep in mind is that it was an investment.

One should not tuck an investment inside a 3 million dollar life insurance policy, with its ever-increasing internal mortality costs, unless you need the death benefit. This was a newly married couple, with no mortgage debt, no school debt, and no children. She was a Peace Corp worker who had never dreamed of marrying a high income professional anyway.

Part of this misdirection lies in the fact that the company has some policies that are (much) better values than others. The consumer doesn’t know that and the agent has no incentive to tell it. The commission on the proposed policy was over 12k; the commission on the variation was less than 2k. The influence of this commission on advice can be profound. It’s much better to get your financial advice from someone not under that influence. How is my compensation influenced by his choice? Zip. I’m paid to help clients find good values.

The conclusion is that connecting with a fine company is just the beginning. Northwestern is such a company that I deal with frequently, and I cannot recall a single time when arrangements with them were not improvable, either with proposed or in-force policies. * There will always be a conflict between your interest and the company’s, no matter how good they are. Paying a guide is money well spent and if you think because you are with a good company you don’t need a guide, think again. This doctor made a 2000% return on his guide fee. Extreme? Yes. But excellent returns on fees for impartial insurance advice (even when you are with a good company) are common- the rule, not the exception.

If you don’t mind living with the advice of an agent who is “under the influence”, you can save that fee. Most people will never know how much better it could have been. However more and more people are discovering the advantage of using an impartial guide, while they save their fee back many times.

*These all had Northwestern policies (see Testimonials):

  • Mark and Liesl Marmon
  • Paul Caldwell
  • Roger Smith
  • Charlton Veazy
  • Bob and Peggy Arrington
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