insurance
How much does a life insurance agent make?
Blending has advantages and disadvantages. The upside: lower premiums and guaranteed convertibility. The downside: delayed cash value, possibly delayed earnings, and the annual amount the Internal Revenue Service will allow you to invest in the policy will be limited by the reduced base amount. In addition, not all term life is convertible.
Getting disclosure
Insurance groups have opposed calls for disclosure of life insurance agent commission on contracts, insisting it would hurt sales. "It's the last financial industry where compensation is not fully disclosed," Steuer says.
Hunt suggests that one easy way to find out how much your agent is making in commission is to obtain an apples-to-apples competing quote from TIAA-CREF, which doesn't pay commissions on its cash-value life products.
But Anne says there's an even easier way: Simply ask your life insurance agent.
After all, his or her rate of compensation is fixed by the insurer, as is the amount the insurer expects to receive based on the policy's target amount. Short of outright fraud, your agent couldn't artificially pad or inflate the contract, even if he or she wanted to.
"Let me put it this way: If I had a company that was A-rated and it cost you $100 and another company that's A-rated and costs $100, what does it matter what I get paid? The (commission) difference is not enough to influence my decision to push one product over another."
That said, how low would she cut her commission via blending to close a cash-value policy?
"I'll go as low as necessary, because a $1 sale is better than no dollars. I tell them upfront: The premium is flexible in these types of policies; you can put in more money if you want or less money if you want. So I'll say, 'Can you do $500 a month? No? Can you do $450? No? Can you do $350? Yes? Done!'"
Bottom line: Your life insurance agent will enjoy a nice payday by setting you up with a policy. Get your money's worth by asking for competing quotes or blended solutions until you're satisfied with your policy.