Are Insurance Agents and Brokers Fiduciaries? What to Know Before You Buy Insurance

Insurance Agents and Brokers Fiduciaries? No, they are not!

Are Insurance Agents and Brokers Fiduciaries? What about financial advisors who offer life insurance?

In the world of finance services, fiduciaries are people who have a legal and ethical obligation to act in your best interest. This means that they must put your needs ahead of their own and avoid any conflicts of interest.

So, are they (insurance agents and brokers or even financial advisors who sale life insurance products fiduciaries)?

The answer is no. Insurance agents and brokers, or financial advisors who offer investment products who also sale life insurance products are not legally obligated to act in your best interest. They are salespeople who work for insurance, financial, or marketing companies. Their primary goal is to sell insurance policies, not necessarily to recommend the policy that is right for you. This doesn't mean that insurance agents and brokers or financial advisors can't be helpful. They can provide valuable information about different insurance products and help you compare prices. However, it's important to remember that they are not unbiased advisors.

And to be clear, they must not be employed by a financial, insurance company or marketing organization. And in most states a life insurance agent who only has a life insurance license can call themselves a financial advisor. Look instead for those, who are independent and are practicing attorney, CPA, or CFP. 

Here are some things to keep in mind when working with an insurance agent, broker, or financial advisor who offers life insurance:

1. Any insurance broker or independent financial advisor with a fairly clean background check can qualify to sale life insurance from most major life insurance companies, but that does not mean those life insurance companies endorses them or their business. For example, many life insurance brokers who belong to network marketing or multi-level marketing organizations focus on recruiting to make sales and can offer products from well-known life insurance companies. So, don't mistake their ability to sell a particular product as a validation of their professionalism, experience, knowledge, or care for your financial well-being.

2. Ask about their compensation structure and the company or organization they are associated with or work for. Insurance agents, brokers and financial advisors typically earn commissions from the insurance companies they sell for. This can create a conflict of interest, as the agent/broker/advisor may be more likely to recommend a policy that pays them a higher commission and/or offers the most sales incentives or bonuses.

• Get quotes from multiple sources. This will help you compare prices and coverage options.

• Read the fine print on the illustrations/quotes. Make sure you understand the terms and benefits of the policy coverage.

Who Are Fiduciaries?

If you're looking for a financial professional who is legally obligated to act in your best interest, you should work with a fiduciary. Here are some examples of fiduciaries:

• Certified Financial Planners (CFPs)

• Registered Investment Advisors (RIAs)

• Attorneys

• CPAs

Fiduciaries typically charge fees for their services but can also receive commissions. They have to fully disclose any conflicts of interest and must put your interest above their own. This helps to ensure that their recommendations are unbiased and are acting in your best interest.

Tips for Working with a Fiduciary

• Ask for recommendations from friends, family, or your current fiduciary professional who have knowledge about life insurance.

• Look for a financial professional who has the proper education, licenses, registrations, and certifications. This means they are held to a much higher standard and must stay in compliance with many organizations and agencies.

• Check the agent or broker's background on the State of California's Department of Insurance website because they must have an active license to legally sell life insurance. This will at least give you an idea of how long they have been licensed, what companies they individually represent, are they affiliated with any marketing insurance agency.

• Research the insurance company or financial company the agent or broker works for. If they represent a specific life insurance company, your options will likely be limited to the policies offered by that company. On the other hand, if they work for a marketing organization known for high sales incentives and/or recruiting new agents to provide for even higher compensations, these are red flags that your best interests might not be prioritized.

By working with a fiduciary, you can be sure that you are getting financial advice that is in your best interest, but that's only half of the equation.

The other half of choosing a good fiduciary professional is knowing their professional and personal experience, education, certification, resources, independence to offer all options instead of what an employer restricts, and their level of complacency if they are an independent advisor.

Important Tips

• Always do your research beforehand. Understand your needs and what type of coverage you need.

• Ask questions to get good answers. Here are some examples:

  • What life insurance do you personally have and why? If it's a cash value policy, can you show me how it's performing relative to its original illustration? Did the cash value performance do better than the non-guaranteed illustrations?

  • What comparable research and life insurance companies and products can you offer me for review?

  • What are at least two customer references you can provide me who purchased the same policy you're recommending to me?

  • What's the free-look period offered?

• Take your time to understand the information and your options. Don't be rushed or pressured.

By following these tips, you can ensure that you are empowered to work better with any life insurance professional or fiduciary.

Why Work with Life Insurance Review (LIR)?

We provides a comprehensive, unbiased review of life insurance options to ensure you make an informed decision. Their services include:

• Detailed comparisons of various life insurance policies

• Insights from fiduciary professionals who prioritize your best interests

• Transparent analysis of policy performance

• Assistance in understanding policy terms and conditions

Frequently Asked Questions:

1. Why should I choose LifeInsuranceReview.com? LIR offers unbiased reviews and professional insights to help you choose the best life insurance policy for your needs. Our fiduciary approach ensures your best interests are prioritized.

2. How do I know if a policy is right for me? LIR provides detailed comparisons and performance analyses to help you understand which policies best meet your financial goals and coverage needs.

3. What kind of policies does LifeInsuranceReview.com review? We review a wide range of life insurance policies, including term, whole, and universal life insurance, providing detailed insights into each.

4. Is there a fee for using LifeInsuranceReview.com? We offers various service plans, but the initial consultation is free. Call us to see if we are a fit for you.