Primerica Life Insurance: An Independent Broker’s Evaluation
As stated on their corporate website: "Primerica's roots date back to 1977 when the company embarked on a revolutionary crusade to transform the life insurance industry. Primerica's "Buy Term and Invest the Difference" philosophy encourages middle-income families to purchase affordable term life insurance so they can have more money to invest in their family's future." On the surface, this philosophy makes some sense, but if you dig a little deeper, there are five major pitfalls when dealing with a Primerica advisor.
- Primerica employs a "one size fits all" philosophy. In many instances, term insurance may be the best solution, but what about when insurance protection is needed for the insured's lifetime? Examples of this include a child with a permanent disability, insurance needed to offset taxes on an investment property, or the transfer of a family business. Life insurance is not simply a commodity; if it was, there would be no need for a life insurance advisor. Careful analysis must be given to both the type and amount of coverage needed.
- Primerica's term insurance policies are very expensive. At the time this article was written, a 50-year-old male non-smoker could get $200,000 of Term 10 coverage for $38.79 per month with Unity Life; the same coverage would cost $65.84 per month with Primerica. One reason for this is that Primerica uses a multi-level marketing distribution model – the independent brokerage model employed by other insurance companies has far fewer layers, which translates into a much more competitive cost structure. Primerica has improved it’s pricing in certain age brackets and is one of the few companies to offer 25 and 30 year Term policies.
- Primerica's term policies are non-convertible, and since they do not offer a permanent life insurance policy in their product lineup, the insured would have to look elsewhere should a permanent policy be needed down the road. Furthermore, should the insured's health change, he/she would probably be out of luck.
- Primerica is the only insurance company that encourages its advisors to work part-time. I wouldn't want a part-time accountant preparing my tax return and I wouldn't want a part-time lawyer preparing my will. The financial service industry is in a constant state of change – in order for an advisor to provide optimal customer service, they need to stay abreast of industry changes – meaning a full-time commitment to the business.
- Primerica employs a captive sales force; their agents can only sell Primerica life insurance products. This places their agents in a compromising position – they are not able to shop the marketplace in order to provide their clients with the best possible value. In the 1990's many insurance companies started to shift away from captive agencies and created Managing General Agencies (MGAs) as a method of distribution their products. MGAs act as the middle man between the broker and the insurance company. Some MGAs only work with a few carriers and thus want their brokers to do the same. There it's important to work with a broker who has access to a full line of insurance companies and is not just one or two.