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The Fiduciary Advantage: Why Independent Insurance Agents Work in Your Best Interest




I got to deliver another life insurance policy today. You might be surprised that I don't know how much we made on it. I really don't care. It's not even a criteria we look at when we serve customers. We generally focus on term insurance, because it's cheaper for higher payouts than some of the other insurance vehicles available to us and our customers. It pays the salesperson way less, but we make suggestions based on what's best for the client, not based on commissions.


Part of the problem with the financial planning industry and life insurance and annuities industry is often people get "sold" services based on how it works out for the agent. Imagine you have $1,000,000 that you want to put into an annuity. Did you know there are annuities we can sell you that would pay the agent 6% ($60,000) if you move that money over? The commission on a 10-year fixed index annuity ranges from 6% to 8%. 8% of a million dollars is eighty thousand dollars... in commission. That's why that part of our industry is so high pressure. We won't participate. We can work with annuities, but we choose reputable companies and we don't make our recomendations based on front loaded commissions. In fact, when you meet with us, we will tell you what we get paid. We don't pick companies based on commissions.


We prefer you keep your money. The policy we delivered today we didn't even check to see what our commission was. What we checked was to make sure it was the most insurance for the least amount of money out of our customers pocket. Period.


When it comes to securing your financial future through insurance, the choice between a fiduciary independent insurance agent and a captive agent can make a significant impact on your coverage and overall satisfaction. In the balance of my time on this article today, we'll explore the value of working with a fiduciary independent insurance agent, emphasizing their commitment to acting in your best interest, as opposed to the often conflicted interests of captive agents.


Understanding the Fiduciary Obligations:

A fiduciary is someone who is legally obligated to act in the best interest of another party. When it comes to independent insurance agents, this means putting your needs first and providing transparent, unbiased advice. Unlike captive agents, who work for a specific insurance company and may prioritize selling the company's products to meet quotas, fiduciary independent agents are committed to finding the best solutions tailored to your unique needs.


The Fiduciary Difference in Action:

To illustrate the impact of working with a fiduciary independent insurance agent, let's delve into a real-life scenario. Meet Jane, a client who had been with a well-known insurance company for years. Her existing policy, though seemingly comprehensive, left room for improvement. Enter Mark, a fiduciary independent insurance agent with a commitment to optimizing his clients' coverage.

Mark's Approach:

Mark began by thoroughly reviewing Jane's existing policy and identified areas where improvements could be made. As a fiduciary, he took the time to understand Jane's specific needs, financial situation, and future goals. Unlike captive agents, Mark wasn't bound to sell a particular product; instead, he shopped the market to find the best options available.

Term Life Insurance: A Consumer-Friendly Choice:

One key aspect of Mark's strategy was to recommend term life insurance, a type of coverage that pays lower commissions to agents but often provides better value and lower premiums for consumers. Term life insurance offers coverage for a specific period, making it a cost-effective choice for those seeking financial protection during critical periods, such as raising a family or paying off a mortgage.

Benefits of Term Life Insurance:

  1. Lower Premiums: Term life insurance generally comes with more affordable premiums compared to whole life insurance, making it accessible for a broader range of individuals.

  2. Higher Benefit Payout: By reallocating resources from high-commission products, like whole life insurance, Mark was able to secure a term life policy for Jane that not only lowered her premiums but also increased the benefit payout in case of an unfortunate event.

  3. Flexibility: Term life insurance provides flexibility, allowing policyholders to match coverage with specific life stages, ensuring they pay for the protection they need when they need it.

Working with a fiduciary independent insurance agent like Mark proved to be a game-changer for Jane. The fiduciary commitment to acting in her best interest resulted in a tailored insurance solution that not only saved her money but also provided enhanced coverage. In this scenario, we're required to fill out some pretty extensive paperwork to document the value that it provides to the consumer to make sure agents are not just unscrupulously replacing one policy with another (the motivation for that would always be commission.) Any replacement policies must be advantageous to the client; otherwise, illegal activities such as churning may occur. The replacement of existing life insurance policies with new contracts of life insurance requires a written comparison and summary statement at the policyholder's request. There has to be a tangible benefit to the conusmer.


Florida has a Code of Ethics for the Florida Association of Insurance and financial advisors, but even moreso serious is activities surrounding integrity with regard to insurance policies are enshrined into Florida Law. "Churning" (replacing one policy with another for no reason) or "Twisting" (getting a consumer to drop a policy and buy a different one) are both illegal in Florida and across the country. This is another reason you should ask your insurance advisor what they scored on their insurance exams. You only need a 70% to pass, and you can retake the test multiple times. It's important that competent agents have mastery of insurance laws. David Happe from Form America got a 95% on the Florida insurance and annuities exam, passing the first time. That's the type of expert you want.


As consumers, understanding the fiduciary obligations of independent agents empowers us to make informed choices, securing our financial well-being with confidence. When it comes to insurance, choose the fiduciary advantage for personalized, unbiased guidance that prioritizes your best interest.


And if you want to work with Dave Happe directly, email help@formamerica.com for a no obligation free insurance consultation.

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