Commission and Term Life Insurance

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dpillai
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Commission and Term Life Insurance

Postby dpillai » Wed Jun 13, 2007 8:58 pm

I was talking to a financial planner who on account of being referred through common friend offered to answers any questions I had about my fiscal fitness.

As we were talking about life insurance and that a term insurance would make sense for me, I learnt that one of the services he offered was to shop around and help me find the right (term) life insurance. If I choose to go with one of the suggestions he had, he mentioned that he would get a commission from the firm that offered the policy like a finder's fees.

I know I should have asked him this question and I most probably will but I was wondering how commission and term life insurance work together. With my limited knowledge about insurance, my understanding is that one of the reasons for the premiums on cash value life/permanent life insurance is very high compared to term life insurance is on account of the agent's commission. Secondly, there is no cash value being generated in a term life insurance so I suppose there is no question of "less" of my money working for me due to an agent's commission.
So my question is -could I be potentially paying a higher premium for the same coverage from the same firm going through the financial planner rather than if I were to be purchasing on my own?

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plonkee
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Postby plonkee » Wed Jun 13, 2007 11:32 pm

I don't know how it works in the US, but over here its generally the case that if you buy directly from the firm, they keep the comission for themselves i.e. the price to you is no cheaper. I'm not saying that definitely true in this case but...
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Baker
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Postby Baker » Thu Jun 14, 2007 3:15 am

you can get term life that has "return of premium" While its not the greatest thing for about $5 more per month they offer a sliding scale to return all money you've given them. To really get the most back you need to keep the policy for its entire length. You're not making any interest on it but its better than not getting anything back.

dpillai
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Postby dpillai » Thu Jun 14, 2007 4:52 pm

Thanks guys.

MossySF
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Postby MossySF » Thu Jun 14, 2007 5:02 pm

From my experience, most insurance companies will not give discounts to people who go to them directly. They depend on their brokers so they will not bite the hand that feeds them business.

dpillai
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Postby dpillai » Thu Jun 14, 2007 5:32 pm

Thanks MossySF.

Swintah
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Don't worry about it.

Postby Swintah » Sun Jun 17, 2007 5:53 pm

The comission is so abysmally low on term. Selling just about anything else would've made your planner more money.

Also, if you're planner is in the US, he may have a fudiciary duty to get you the best deal.

dpillai
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Postby dpillai » Sun Jun 17, 2007 8:58 pm

Thank you Swintah.


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