The Dirty Secret Your Life Insurance Broker Isn’t Telling You

A couple of weeks ago, I told you about the big issue with your mortgage broker. Essentially, they’re getting paid a volume bonus to funnel most of their business to one or two lenders, which makes it really difficult to believe that a broker is truly sending your loan to the lowest priced lender.

If you think the mortgage broker business is bad for doing this, then you’re not going to like what your life insurance broker is doing.

The life industry in a nutshell

The world of life insurance brokers works very much like the world of mortgage brokers.

Most life insurance agents are part of organizations called managing general agencies. The majority of agents belong to big ones which offer access to every major life insurer in Canada. In theory, this is good for customers.

Like with mortgages, the life insurance for most folks is pretty standard. The average person will get an average amount of insurance, paying about an average price to do so. In this sort of environment, how does a life insurance company get ahead?

There are several ways. Several insurers hire their own sales staffs to push their own stuff. Both Sunlife and Manulife have their own wealth management sales reps, who sell insurance, investments, mortgages, and so on. TransAmerica owns World Financial Group, which uses a pyramid sales structure to recruit more agents, who then sell insurance and mutual funds.

Most insurance companies don’t want to hire their own sales staff though. They’d rather focus on the insurance side of the business. So they deal exclusively with brokers. But how can they differentiate themselves from the competition? Why will brokers choose their products over a competitor’s?

The solution is simple. Like with mortgage brokers, life insurers give agents perks for sending most of their business to a certain insurer. But instead of cash, agents get all sorts of other perks, like exotic trips.

These trips aren’t the standard weekend jaunt down to Vegas either. Insurance execs spend lots of time planning these out, knowing that the difference between a mediocre trip and a great one can motivate a broker to send many potential new deals their way.

These trips typically include wives (or husbands), and as long as there are a couple of meetings about insurance-type things, they’re tax deductible. They’re a nice distraction from Canada’s long winters.

How to make sure you don’t pay too much

I’m not really a fan of these types of incentives, but I don’t let myself lose a lot of sleep over them.

The whole reason why these types of incentives need to exist in the first place is because the life insurance industry is so competitive. For many types of policies, the difference in premium costs between different companies is just a couple of bucks each month. There are always going to be outliers that are more expensive, but for the most part these policies are priced competitively.

The easy way to make sure you’re not getting ripped off is to get a quote online before you even go and talk to a live agent. These quotes aren’t perfect, but they should give you a decent enough place to start. If online tells you a certain policy should cost you $50 per month and an agent quotes you $75, at least get the agent to explain the big difference.

You can also ask the agent some very specific questions if you don’t like the quote. How many companies has he checked on your behalf? And just how many companies does he work with? Why did he choose one over the other?

Most agents will go a step further, and discuss some of the best quotes with you. It’s part of their customer service. Getting more than one quote is the whole reason why people go to brokers in the first place.

For the most part, your insurance agent is interested in getting you a good deal. They know if you’re satisfied, you’ll refer your friends. But just remember, your agent just might have a very large incentive to not get you the best deal that’s out there.

Simple Celebrations for Christmas Savings

Like the fictional Cratchit family in Charles Dickens “A Christmas Carol”, most of us realize that Christmas isn’t about the things that money can buy, yet even that family was excited to be able to have a big fat goose for Christmas dinner, courtesy of a reformed Scrooge.

Many children in North America experience a vastly different Christmas than the Cratchit family had, with brightly wrapped boxes filled with presents extending many yards out from under the tree into the living room; special Christmas outfits; and large store bought stockings filled with candy and toys. It seems that parents feel pressure to make Christmas present unwrapping last, even though the children rip and tear the paper off one present after another, not stopping to play with or thank the giver for the gift.

However, those probably won’t be the memories that come to mind when they are grown and parents themselves. Instead, they are more likely to think back fondly on the simple family celebrations and traditions your family has. Celebrations and traditions that don’t require massive outlays of money or stacks of presents under the tree.

What are some of these simple celebrations?

Decorate the house as a family.

Why decorate? Decorating sets the season apart for you and your family, letting you know with every glance that it is a special time of year.

Most of us put up at least some changes in decor (in addition to our Christmas tree), but you don’t need boxes of shiny ornaments or lighted moving yard scenes to make your home memorable at Christmas.

Whatever you do to decorate, whether it is to clip evergreen boughs and arrange them or have the kids draw Christmas trees on paper then cut them out and hang them around, whatever you do, make it a special event, a family event. Put on some Christmas music. Carry forward an old family tradition, telling the family story as your new family replicates it, or create a new tradition together as a family.

Celebrate your gratitude through giving.

It has been scientifically proven that folks who give get an endorphin spike, making them fell happy. Help your kids pick out toys they no longer want, to give to a local charity. Do a special giving project together and let the kids play a big part – whether it be trying to get on a list to serve together at the local soup kitchen or making and delivering cookies for an elder in a nursing home.

Establish a tradition to get the tree.

What you do each year to get and decorate that tree will be remembered! My family used to wait until late Christmas Eve, then hop in the car and find a tree lot still open. We would select the best tree, drag it home in the trunk and begin decorating together right away.

Perhaps you have an artificial tree, you can still make a tradition and a memory by getting it out together and decorating it. Or maybe, you have a family outing to go to a Christmas tree farm to cut your own.

Sing!

When the family gathers, sing Christmas songs together. When I was young, neighbors still went around in groups caroling in the neighborhood. Afterwards we would gather at one of the homes for cookies and hot chocolate. At family gatherings, we were each expected to prepare a performance of some sort to share with the family – whether it be to tell a story, read a bible verse, play an instrument or sing a song.

Attend a seasonal event together.

Almost all areas on the continent have special recurring Christmas events. Pick one and make it parr of your family holiday celebration.

For example, when I was little, our city still had huge downtown department stores – like Macy’s and Famous-Barr. These department stores decorated their windows to draw in the shoppers. The decorations included movable figures, model trains which passer bys could start and stop by pressing a special section of the glass and of course, music. Each year my aunts gave Mom and Dad a break and took us downtown to view the window magic. This was over 50 years ago and I still have those warm memories.

Tell readers what you remember most fondly from your Christmas past.