Credentials aren’t a necessity, but they are a way that good agents typically distinguish themselves. Because insurers tend to set prices uniformly, you can’t really play one advisor against the next. If they both quote policies from XYZ National Life, your costs should be nearly identical; it will only be by searching for more and different providers that an agent may be able to create an edge. Since you will pay roughly the same regardless of the agent working with you, choosing someone with a high degree of professional achievement whose expertise might help you find ways to make your coverage more efficient helps to ensure you’ll get the most for your money.
There’s no substitute for professional achievement, and it doesn’t necessarily cost you much more to get an accomplished agent than it does a newbie.
The other key reason to pursue agents with credentials is the codes of conduct and ethics that generally go with membership in these groups.
Insurance agents are dual agents, working on your behalf while representing the insurer; they are supposed to serve the best interests of both masters. Professional standards certainly give them the perspective that makes it easier to walk that tightrope.
For life insurance agents, the Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC) designations are generally considered the top credentials. Both are administered by The American College, with the ChFC being the financial-services add-on to the insurance-oriented CLU mark. Agents who have one or both of these credentials agree to abide by the college’s code of ethics and conduct.
A Chartered Property Casualty Underwriter (CPCU) has completed property and liability coverage education requirements from the American Institute for Chartered Property Casualty Underwriters, a group that has a strict code of professional ethics.
Insurance is one area where advisors often have sub-specialties, and there seems to be an association for each of those groups. There’s the Association of Health Insurance Advisors or the Association for Advanced Life Underwriting. That said, the overarching group for many of these niche specializations is the National Association of Insurance and Financial Advisors. Membership does not require the same kind of training as some of the other programs, but there is a code of conduct to follow.
Beyond the credentials, insurance agents frequently pursue financial planning designations, such as the Certified Financial Planner mark. This is helpful, but you need to make sure that the agent understands the role you expect him to play, especially if you already have a financial planner to oversee your personal finance needs.
Perhaps the most confusing, confounding credential in all financial services is the MDRT mark used by insurance agents who have achieved status in the Million Dollar Round Table. When the group was formed in the 1920s, the Million Dollar Round Table was all about the biggest “producers,” insurance agents who sold more policies for more dollar volume in premiums than anyone else. The idea was that the industry’s best sales pros would share their ideas.
Over the years, the Million Dollar Round Table has evolved and taken on a more industry-minded, general training role, and has developed a code of ethics. Still, it is a status symbol for top salespeople, and someone who can sell tons of insurance is good at his or her job, but might not be the best one in terms of developing close one-on-one relationships with customers. If an advisor says she has this status, ask how it actually helps you.
If a prospective agent offers credentials beyond these basics, find out what it took to earn them, and what they mean for you. The industry seems to be churning out new designations at a rate of one or two per year, trying to see which specialties resonate with practitioners and have staying power.
One of the key decisions you will make in buying life insurance and in choosing the right agent to sell you coverage is determining what you really want insurance to achieve.
Your basic need is replacing lost income and protecting your loved ones from a future without you. That means a basic term insurance policy where you buy coverage for a set period of time can work very well. When you are a young married parent, the coverage protects against catastrophe, but it lapses when you are a senior, when your life’s savings and any pensions protect your family.
Many consumers, however, want to have their insurance premium dollar generate a long-term investment return. Cash-value policies are more expensive and tend to generate bigger commissions for the agents, so it’s cheaper to “buy term and invest the difference,” provided you have the discipline to actually capture and invest the savings.
Policies that build investment value can be a type of forced savings, by comparison. My father-in-law used insurance this way, saying he might not always feel like scrimping and saving to make investments, but that he always paid his bills on time. “Insurance is like a bill for savings.”
There are plenty of arguments in the industry over which is the best policy and for whom. There’s also no one right answer. That’s why you will want an agent to run you through all of the potential options, so that you can figure out the coverage, cash flow, and investment option that works best for you. Remember, too, that many policies can be converted, so that the term coverage you buy at age 30 to protect you while the kids are young may be convertible into a whole or variable life policy before the term ends at age 55. That’s a big reason why you want an insurance agent who will work with you over a lifetime.