Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites. You can find him on Twitter.

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UPDATED: Sep 6, 2020

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A Matter of Policy

Insurance is like money or good looks: You never feel you have enough. I had begun to sense that maybe I needed more life insurance, for no particular reason other than that I’m fast approaching my 40s and am beginning toget nervous about my finances in general.

Am I saving enough? Am I investing in the right mutual fund? That unsettling feeling intensified when a close friend called with the news that one of his friends like us, a man in his late 30swas struck and killed by a car as he and his new wife waited at the curb for the traffic light to change.

Eventually, talk turned to the swift passing of the years, the uncertainty of life and insurance. My friend revealed that he had gotten additional insurance to provide for his widowed mother, just in case. “Let me tell you, man,” he soberly advised, “you gotta look into getting more insurance.

I assured him I would. But before insurance sales agents become giddy with anticipation. I’m here to announce that I may not need their services. Like millions of Americans, rather than call up my local insurance sales office, I decided to surf the World Wide Web to begin my search for a life insurance policy. With just a click of my computer mouse, from the privacyof my home, I can tap into sites of major insurers such as the John Hancock Mutual Life Insurance (company (www.jhancock.com), or online insurance quote services, and, in minutes, learn all about insurance, get quotes from hundreds of underwriters nationwide, calculate my insurance needs and even buy a policy.

Surfing the Web saves money and time. More important, to many, it doesn’t force you to listen to 10 different high-pressure sales pitches. The Internet gives customers a “better ability to shop for products they want, to do feature and price comparisons,” says Gilon I. Irwin, vice president of Booz-Allen & Hamilton, a management-consulting firm in New York. “The Internet makes it more competitive, which is what consumers want.”

In a 1998 study, Cambridge, Massachusetts-based Forrester Research madea prediction that $4.1 billion worth of insurance will be sold over the Web in 2003, up from just $155 million in premiums in 1998. And consumers can find a variety of insurance products on the Web, from auto and home to individual health insurance, disability and annuity. One of the most popular life insurance products peddled in cyberspace is the simplest: term life insurance, which covers the insured for a certain time. Furthermore, now is the best time to shop for term life insurance, because premiums are at an all-time low. And the Web is playing a big part in pushing those prices down.

Online insurance quote services such as Nevada-based QuickQuote Financial(www.quickquote. com) and California-based InsWeb (www.insweb.com), just to name the top two are fast becoming the new insurance sales representatives for a growing army of online insurance shoppers. Some of these services are comprehensive clearing houses for a wealth of insurance information. For free, customers can view quotes from hundreds of underwriters in an instant.

Saving money was on Ray Ponden’s mind last fall when he decided to searchthe Web for a new life insurance policy. The Venetia, Pennsylvania, resident bought his first insurance policy through a salesman and didn’t relish the experience) describing it as “a pain in the butt.”

The 50-year-old mechanical engineer and father of three searched the Web and, through the QuickQuote service, found a premium that was about 20 percent below his existing policy. Shopping that way “was much more convenient for me,” says Ponden.

With these services, customers generally fill out forms online, answering questions about their medical history and any high-risk habits. After they receive a quote, they can apply for an insurance policy directly from the company online. (The insurance companies also provide a list of their local agents online.) Many of these services have toll-free customer service telephone numbers and case-management departments that guide customers through the underwriting process. Daniel Wager, founder of QuickQuote Financial, says his service is one of the few that has licensed in-house agents to help clients get the best and lowest-priced policy.

Using an online quote service allayed two of Ponden’s major concerns: He didn’t want to reveal too much information about himself over the Web, and he feared the quotes he’d get would be just a tease and he’d be slapped with a higher price down the line. But the most private information he had to give was his age, he says, and the initial quote was the price he ended up paying.

And that’s no accident, says Quick-Quote’s Wager, who boasts that 82 percent of the customers who log onto his site get the quoted price or lower one. He also says filling out QuickQuote’s one-screen form takes about 45 seconds or less.

It took me considerably more time: three minutes. Like Ponden, I feared having to reveal too much private information and encountering bewildering medical questions. But the process, as advertised, was relatively painless. Giving my name was optional, and the questions, such as whether I’ve piloted a plane in five years or smoked, were pretty easy. Plugging in my requestfor a $500,000, 10-year term policy for a nonsmoker with no health problems, QuickQuote presented me with five quotes of annual premiums ranging from $351 to $507. When I visited InsWeb’s site, which has a more detailed questionnaire, I was offered one quote, at $355.

Online quote services are not the best choice for everyone, experts say. One of the criticisms of online quote services is that they do a pretty good job of estimating premiums for a healthy nonsmoker looking for a basic policy but come up short in estimating premiums for a person with complex health problems. A good agent can find insurers that are lenient with certain diseases.

Another criticism has to do with commissions. Many online brokers earn commissions for selling policies, so their database of carriers isn’t likely to include low-load companies that don’t pay commissions. Some industry experts also recommend that customers supplement online quote services by calling a low-load insurance company, such as Ameritas Life Insurance of Lincoln, Nebraska, or USAA of San Antonio, Texas.

As with most transactions over the Internet, many insurance industry officials say buying insurance in this manner is best for customers who are self-directed and comfortable managing their own finances. Though the Web can certainly be a valuable educational tool, some experts say it’s best to know a bit about insurance and what you need before jumping online. “I’d tell the young couple who doesn’t know the difference between term life and universal or variable to go see a broker,” says Robert Bland,president of Darien, Illinois-based Quotesmith.com Inc. (www.quotesmith.com).

Customers can also go to individual carrier sites to buy insurance. But the insurance industry itself has been slow to embrace the Web, according to industry observers. Many carriers simply use the Internet as a marketing tool and to service existing policies instead of for selling insurance. Moreover, companies are afraid of alienating their traditional distribution system: agents. John Hancock is one of the more active insurers on the Web, offering insurance products and interactive, educational tools like the online insurance brokers offer. Last year, according to Jim Smith,-JohnHancock’s executive director for electronic commerce, the company’s Web-based sales exceeded expectations. He says the company isn’t afraid of alienating agents because it believes the customers who shop online are different from those who’d go to agents.

The Internet probably won’t lead to the death of the insurance salesman; most people, insurance officials tend to believe, will continue to prefer face-to-face dealings with agents. However, many in the industry agreethat online insurance sales will grab a larger and larger share of the pie as insurance offerings become more sophisticated. The undeniable appeal of online insurance shopping to consumers is reflected in this growing perception: “It’s impossible,” says Quotesmith.com’s Bland, “to sell a high-priced policy to a smart Internet buyer.”

New York-based C.C. Williams frequently contributes to financial publications such as Mutual Funds and Individual Investor.

Covering Your Bases

Here are several tips from insurance experts for getting the most outof shopping for insurance online:

  • Find a website with as many quotes as possible says RobertBland, president of Darien, Illinois-based Quote-smith.com Inc. (www.quotesmith.com)’,his service searches a database containing quotes from over 300 companies.
  • Find a site that offers independent ratings of insurers as wellas quotes-most do. Customers should make sure the insurance companies from which they receive quotes are financially healthy and are licensed to sell insurance in the state in which they live.
  • Expect a medical exam. Using the Internet supplants the salesperson but not the medical exam. Usually the online service sends a paramedic to prospective clients’ homes to collect the necessary urine and bloodsamples. The online route, however, still knocks a week out of what is in many cases a six-week process.
  • Look for a privacy statement on the sites and make sure that credit card information is encrypted, says Jim Smith, executive director for electronic commerce for the John Hancock Mutual Life Insurance Company(www.jhancock.com) in Boston.
  • >To make sure you get the most accurate quote from a site, be absolutely truthful and knowledgeable about your medical history when filling out the forms. Customers must also be aware that the price they are quoted won’t always be the price they end up with. Further examination of the application and the results of the medical exam can reveal information that could change rates dramatically.