When an Insurance Agent calls, most people hang up. They think to themselves, “what can this hack ever do for me?” or maybe, “I’m not gonna let this girl scam me into buying something I don’t need.” Where do these assumptions come from? Could we all be once bitten and twice shy about the whole insurance game?
Let’s take a step back; what even is Insurance?
At its core, insurance is one of many ways to mitigate risk. Humans have been hedging their bets since the dawn of civilization. Feudal states formed alliances to mitigate the risk of attack. Farmers mitigate the risk of crop failure by diversifying their planting. With the development of modern commerce, merchants looked for new ways to avoid financial loss.
One of the first modern forms of insurance applied to business loans in the Mediteranean. Ship owners paid a fee on their loans (now known as premiums); in return, the lender would agree to void any contract in the event that the ship sank. These fees spread the risk of loss across all ship owners, and compensated the loss for the lender when a ship did sink.
4,000 years later, insurance still serves the same basic purpose. Customers pay a premium to protect themselves from financial loss.
Now, the government is involved. Insurance companies have built huge skyscrapers with our premium payments. Everyone and their mother has a story about getting scammed, and that jerk down the street got a five-figure payout when a kid dented his ferrari. Where does the reasonable stop and the scam start?
It’s time to call an expert.
Let’s make a quick distinction. An insurance agent can be either a Broker or a Dedicated Agent. Both have their license with the state, both can sell you insurance and both are fiduciaries who legally must do what is best for the customer. The big difference is who they work for.
Your Mutual of Omaha Dedicated Insurance Agent works for Mutual of Omaha. His or her obligation is to the company that employs them. An insurance broker, on the other hand, has contracts with many companies; their only obligation is to the customer.
A dedicated agent will likely only speak to their client over the phone. They will only provide information about the company that they work for, and they will only do enough to keep their customers from switching.
A broker will sit down with you, weigh out your options, and choose which company and plan works best for you. Brokers spend time dealing with each company, and have first hand knowledge of which companies to trust.
A broker is on your team. An agent is on the insurance company’s team.
With that in mind, let’s ask the real question here.
What can an Insurance broker do for me?
For customers over the age of 65, Medicare is a constant source of frustration and confusion. Every year, Advantage plans move, supplements get more expensive, drug plans change, and it all happens out of sight of the customers.
Let’s look at an example.
Betty, aged 65, pays 105$ each month for her Medicare Supplement with Company A. She’s happy with her coverage, and has never paid for a medical bill. Later that year she gets a letter.
Dear Betty,
We appreciate you for being a loyal Company A customer. Due to recent world events, we are raising our rates by 15% this year.
Thank you for your understanding.
Sincerely,
Company A
As a frugal and diligent customer, Betty calls the number on her insurance card to find a better option. After discussing the issue, the agent from Company A informs her that there are no cheaper plans unless she is willing to sacrifice coverage. What is there to do? Betty has health issues, so she can’t afford to take less coverage. It looks like she’s caught between a rock and a hard place.
Now let’s take a look at another example.
Grace is also 65, she also pays 105$ each month for her Medicare Supplement with Company A, and is very happy with her coverage. Later that year though, Grace gets a letter.
Dear Grace,
We appreciate you for being a loyal Company A customer. Due to recent world events, we are raising our rates by 15% this year.
Thank you for your understanding.
Sincerely,
Company A
Grace has a family history of health issues and does not want to lower her coverage. Lucky for Grace, she has her Insurance Agent’s phone number saved in her phone. After a 15 minute phone call, Grace’s broker has switched her from Company A to Company B. Her premium went back down to 105$, and she kept the same coverage. Grace also comes away with an extra perk. Her new Agent calls each year to review her coverage, which helps keep Grace's premiums as low as possible.
Having an agent on your side can be an incredible time saver. Regulations are confusing and vary state to state. With a professional by your side, there is no need to learn the ins and outs of your insurance.
Here are a few common changes that people without an agent deal with:
Medicare Advantage Coverage Area Changes
Medicare Advantage plans are provided by private insurers. They give coverage that replaces traditional medicare. To maintain their profits, companies add or remove plans from certain areas. An agent can remedy any loss of coverage by replacing the Advantage plan with a comparable one.
Medicare Supplement Price Increases
On traditional medicare, most seniors have a supplement (Medigap Policy). These policies are also with a private insurer, but the plan details are decided by the government. As recipients age, their premium increases. With an agent, clients will stay in the cheapest and most appropriate plan as they age.
Market Based Annuities and Life Insurance Trends
Insurance agents can sell certain investment products and annuities with their license. These special insurance products can track the stock market, or other economic indicators. With changes in global politics, prices and trends vary with these products. A good Insurance Agent will keep their clients up to date on these products as extra investment vehicles.
Medicaid Maintenance and Expansions
Medicaid is an erratic aspect of Medicare insurance. It provides coverage for those who cannot afford it themselves. This safety net has stipulations though. Certain life insurance situations will disqualify recipients from their medicaid. Agents can cancel and write new policies for people at risk of losing their medicaid.
With so much going on, it's in everyone's best interest to have an insurance agent.
All insurance and finance advice isn't created equal. Insurance brokers are different than stock brokers. A stock broker's only obligation is to make a sale. An insurance broker is also a fiduciary. This means an insurance agent must act in the clients best interest. By law, an insurance agent can only do what they think is best for the customer.
As stated before, insurance agents are versed in, and sell investment products. Many clients let their agent handle all their financial planning. A well coordinated investment portfolio includes insurance products to maximize returns.
In the beginning, we determined that Insurance Agents are more than an annoying phone call. We've seen that they can help avoid overpaying for insurance. Agents keep clients informed and ahead of an ever-changing financial landscape. Most importantly, agents are capable of handling a healthy financial portfolio, and have a legal obligation to keep it healthy.
They may be seen in a negative light, but insurance agents provide an invaluable service to their clients. Bad PR aside, an insurance agent should be a core part of any financial planning. It's the simplest way to mitigate your financial risk.
If you are looking for a dedicated insurance agent, please contact Strong Family Financial today.