Questions to ask a life insurance agent

The best questions to ask a life insurance agent are the ones that expose who the agent works for, how they are paid, why they are recommending this particular policy and what could go wrong with it. A good agent answers them plainly and in writing; an agent who dodges them has told you something useful. Ask them before you apply, not after the policy is delivered.

Start with the agent: license, loyalty and pay

An agent (the industry word is producer) must hold a state license to sell life insurance. These questions take two minutes and screen out most of the trouble.

1. "What is your license number, and which states are you licensed in?" Then check it yourself with your state insurance department; the how to check that an insurance agent is licensed guide shows how. A license in your state is required, whatever the agent's website says.
2. "Do you represent one company or several?" A captive agent sells one insurer's products; an independent agent or broker can place you with many. Neither is automatically better, but you should know which you are talking to. See captive vs independent life insurance agents and life insurance brokers vs agents.
3. "Which companies can you not sell me?" An independent agent may still have contracts with only some insurers. The honest answer is usually a short list of exclusions.
4. "How are you paid on this policy, and does it change if I choose a different one?" Agents are generally paid by the insurer, mostly through a first-year commission that is a large share of the first-year premium, with smaller renewals. Permanent policies typically pay more than term. That does not make a recommendation wrong, but it is a reason to ask why this policy and not a cheaper one. how life insurance agents are paid explains the structure.
5. "Will you be my agent after the sale?" Ask who handles service requests, beneficiary changes and annual reviews if the agent leaves the business.

Ask about the recommendation

1. "Why this type of policy and this amount?" The answer should trace back to your needs: income to replace, debts, children's expenses, how long each lasts. If the agent has not asked about your finances, they have not done a needs analysis. Compare their number with the How much life insurance do I need? and How much life insurance do I need?.
2. "What would a term policy cost for the same death benefit?" Even if you lean toward permanent coverage, ask for a term quote as a baseline. term vs whole life insurance: which fits you covers the trade-off.
3. "Which two or three other policies did you consider, and why did you rule them out?" An agent who compared options can name them.
4. "Is this policy meant to be kept, or could I need to cancel it?" For permanent policies, the first years can leave little or no cash to take out. Ask for the surrender value for each of the first ten years.
5. "Does this replace any coverage I already have?" If you are replacing a policy, state rules typically require disclosure and a comparison, and a new policy restarts the the two-year contestability period and may cost more because you are older. See twisting and churning: replacement sales abuses for what an improper replacement looks like.

Ask about the policy

1. "Which numbers in this illustration are guaranteed and which are projected?" An policy illustration for whole life, universal life or indexed universal life shows what might happen, not what will. Ask to see the guaranteed column and the cost if dividends or credited rates come in lower. See guaranteed vs non-guaranteed values in a policy illustration and how to read a life insurance illustration.
2. "Is the premium level and guaranteed for how long?" For term, ask what the premium does after the level period ends and whether you can convert to permanent coverage, and until what age or date (converting term life to permanent: how the conversion option works).
3. "What riders are included, and what does each cost?" A rider such as waiver of premium or an accelerated death benefit may be free, built-in or priced separately. See life insurance riders: which are worth paying for.
4. "What rate class am I being quoted, and what would change it?" Ask whether the quote is final or subject to underwriting, and what in your history could move you down a class (life insurance rate classes: preferred plus to substandard).
5. "What are the exclusions and limits in the first two years?" Ask about the suicide clause, any graded death benefit, and the contestability period (what life insurance doesn't cover: exclusions to know).

Ask about the company

1. "What are the insurer's financial strength ratings, and from whom?" Ask for the ratings from AM Best, S&P, Moody's or Fitch, with dates, then confirm them yourself. AM Best, S&P, Moody's and Fitch ratings explained explains what the letters mean.
2. "Is the insurer a mutual or a stock company?" It affects who the company answers to and whether the policy can pay dividends (mutual vs stock life insurance companies).
3. "How does the company handle claims, and how do I reach it?" Ask for the claims phone number and how long beneficiaries typically wait.

Ask about next steps

1. "What happens if I miss a payment?" Ask about the life insurance grace periods and lapses, automatic payment and whether you can name a third party to be notified before a lapse.
2. "What do I get in writing?" You should receive the policy summary or illustration, the application copy and, in most states, the NAIC buyer's guide. The NAIC's model disclosure rule requires a Buyer's Guide to be delivered before the first premium is accepted unless the policy has an unconditional refund period of at least 10 days, according to the NAIC Life Insurance Disclosure Model Regulation (#580). Your state's the free-look period: returning a policy for a refund is also your safety net.

How to use the answers

Take notes, and ask each agent the same questions so you can compare. Put the answers beside the quotes in the life insurance quote comparison worksheet. A hypothetical example: say you are 38 and an agent proposes a whole life policy when you asked about term. A fair test is to ask for both, ask the agent to explain in writing why the permanent policy fits a lifelong need you actually have, and see whether the explanation survives a night's sleep. If the reason is "it builds cash value" and your need is a 20-year mortgage, the term quote probably answers the real question.

Red flags worth walking away from: pressure to sign today, a quote that depends on a vague "limited-time" offer, reluctance to put the commission or the guaranteed numbers in writing, a suggestion to misstate a health fact on the application (what happens if you lie on a life insurance application), or a request to pay by gift card or into a personal account.

Key takeaways

• Verify the agent's license with your state insurance department, and ask whether they represent one insurer or many.
• Ask how the agent is paid and why this policy was chosen over a cheaper alternative; request a term quote as a baseline.
• For any permanent policy, insist on seeing the guaranteed numbers, not only the projected ones.
• Check the insurer's ratings yourself rather than relying on the agent's summary.
• Get the answers, the policy summary and the buyer's guide in writing before you pay.