By Jim Fredererick
To hear the purveyors of life insurance in cyberspace tell it, their Websites are the insurance equivalent of utopia, a wonderland devoid of pushy sales agents where a few clicks of the mouse can instantly hook you up with the ideal policy at the lowest price.
And these sites are an excellent place to begin your search for life insurance, since you get quick access to scads of premium quotes. For example, surf over to QuickQuote (www.quickguote.com), and you can sift through a database of more than a thousand policies offered by 18 insurers. InsureMarket (www.insuremarket.com), the site run by personal finance software giant Intuit, limits itself to life policies of only five major insurance firms. Rut the site also features worth while planning materials, including an insurance calculator that can help you figure out how much insurance you need.
But regardless of the number of quotes and other information these sites offer, the overriding fact is that choosing a life insurance policy doesn't lend itself to a quick session of Net surfing like, say, buy ing the Spice Girls' latest CD. Even he bare-bones term policies to which online sites mostly restrict themselves carry plenty of complications. If you buy without also doing a bit of research offline, you could pay more you should or even end up with the wrong type of policy.
Probably the biggest surprise in store for online shoppers is that the premium quote you see on the screen may not be the one you get when you sign a contract. For example, I recently went to the
Quotesmith (www.quotesmith.com) site in search of $500,000 worth of term coverage for a nonsmoking 39-year-old male resident of Illinois. I specifically asked for policies that would guarantee not to increase premiums for at least 10 years. Within seconds, I homed in on a policy from Old Republic Life with an annual cost of $305, or $150 less than one listed from First Colony Life. But I would get Old Republic's rock-bottom rate only if I am in perfect health and don't have a dangerous occupation or hobbies, and if my family has no history of heart problems or other chronic illnesses. I can find out about these qualifications for Old Republic's policy, as well as those for other policies offered through this site. But to do so I must click open the policy and read the "Plan Acceptance Guidelines".
What you can't do at Quotesmith is factor your health and family history into the screening process. So if you wanted a quote that reflected, say, a family history of heart disease, you would have to click your way through the guidelines ot dozens, if not hundreds, of policies, a process that could take hours. And even then, you wouldn't know your exact premium until the company sent a medical technician lo your home or office to give you a physical, draw blood and take your medical history.
QuickQuote, InsureMarket and InsWeb try to give more accurate quotes by asking questions about your health and background. InsureMarket, for example, allows you to select your cholesterol level and blood pressure from pulldown menus. Butplug in numbers that are even slightly off, and you may not find the policy with the lowest premium. When I asked tor a $350,000 10-year policy for a 35-year-old woman from California with blood pressure of 136 to 140 over 81 to 85, for instance, Lincoln Benefit Life had the lowest premium at $239.51) a year. Take her blood pressure up a notch to 141 to 150 over 86 to 90, and Transamerica Occidental Life offered the lowest premium ($255.50). while Lincoln Benefit's quote jumped 41% to $337.50.
First-year premiums paid by online life insurance shoppers will increase from $17 million today to $109 million in three years, according to Forrester Research.
Another, albeit smaller, short coming to online shopping is that you're pretty much limited to term insurance, and a specific type of term policy at that: level-premium term, which charges the same annual premium typically for five, 10, 15 or 20 years. Most insurance shoppers won't find these two restrictions a problem. Term should be the policy of choice for most people since it gives you the highest immediate amount of coverage for whatever premium you can afford. And a level-premium policy lets you lock in your annual insurance costs, as opposed to annual renewable term (ART), whose premiums start small but increase dramatically as you get older.
But in some cases ART is the better choice. "A smoker who's serious about quitting would be better off buying an annual renewal term policy until he's quit smoking for 12 consecutive months," says Dick Weber, an insurance consultant in Safety Harbor, Fla. "Then he can reapply as a nonsmoker for level term at lower rates." If the smoker shopped only online, he might never consider this option.
Finally, despite the online sites' vaunted databases, I've found you can sometimes do better by picking up the phone. For example, when. I called Zurich Direct to verify a quote I'd pulled off the InsureMarket site, a phone rep offered to write me the same coverage for $405 a year instead of the online price of $465.
So what's the best way lo use the Web to buy insurance? You can begin by thinking of the Internet as a research tool and not a one-stop electronic mall for insurance. First, gel current medical information from your doctor, including recent cholesterol and blood-pressure readings. Next, visit the sites I've mentioned and come up with a handful of five or six policies that appear to offer the best rates. Then, get on the phone and call an independent insurance agent who carries policies from a wide assortment of insurers to see if the agent can beat the quotes you've gathered online. Granted, we're talking more work than screening and clicking. But assuming you're not going to make an annual event of this exercise, the extra hours you spend now will pay off in lower premiums for years to come.