How is life insurance sold?

Insurance is sold both as individual and group policies.

Individual policies are sold either through licensed insurance agents or brokers or directly from the company over the telephone, through the mail or over the Internet.

If you buy a policy through an agent, you will pay a commission called a “load.” It is deducted from premiums paid by the policyholder, with the vast majority deducted in the first year of the policy.

Policies sold directly from the insurance company to the policyholder, through direct mail, over toll-free phone numbers or over the Internet are called “no or low load.” Since there is no salesperson to compensate, the savings are passed on to the policyholder in the form of faster cash value build-up. Remember that the personal service provided by an insurance agent may not be available if you purchase the product directly from an insurance company through the mail or online.

Ask insurance agents about their qualifications to sell insurance. One designation that shows they have passed a series of rigorous exams is the Chartered Life Underwriter (CLU). You can find out more about CLUs from the American Society of Financial Service Professionals at 270 South Bryn Mawr Avenue, Bryn Mawr, Pennsylvania 19010; 888-243-2258; http://www.asclu.org/

Group policies are bought by employers, unions or trade associations and offered to employees or members either as an employee benefit or a member benefit. Employers usually pay most of the cost of premiums, while associations arrange for group rates but have the premiums paid by members who buy policies.

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