Thinking of getting Primerica’s Term Life Insurance?
Primerica, originally an insurance company, has existed in Canada for number of years. Primerica’s main business inhere term life insurance, but other services are also provided: investing in Mutual Funds, debt consolidation and other. There are three other states where Primerica run: the United States, Spain and Puerto Rico. Primerica was established in 1977 and belonged to Citigroup for number of years. With the financial crisis developing, Citygroup decided to sell Primerica to Berkshire Hathaway, a Warren Buffet company.
Today I would like to share some of my thoughts on Primerica with you. Please treat the article as a point of view of an independent life insurance broker with over 15 years of experiences, nothing more, nothing less. If you make a simple search in Google about Primerica, you will find enough articles noting the company’s structure, but not as many pondering on the company’s products. That’s why I decided to concentrate on their products before anything else.
One size fits all?
The Term Life Insurance is the only kind of life insurance offered by Primerica. There’s nothing wrong with the term life insurance, but this policy simply cannot be the best choice for just about anyone out there. There’s also the whole life insurance and the universal life insurance. Why does not Primerica offer them? To give an example, a child with permanent disability would definitely need a different type of life insurance than term life insurance, or those in situation when the insurance is needed to offset taxes on an investment property.
The cost
Many of Primerica policies cost much more than the similar policies of their competitors by 30 to 40%. That’s caused by the way the company does business, which I will discuss at the end of the article. But it’s not all that bad with Primerica, because it is one of the very few insurance companies that still offers 25 and 30 year term policies and policies for specific age groups are in fact quite competitive.
Convertibility
Yes, Primerica’s term life insurance policies are non-convertible, simply because there is nothing to convert it to (no whole or universal life is offered). Of course you could keep renewing your policy for as long as you like – or for as long as you can afford it, since it gets more and more expensive with every new term.
I believe these are the main errors concerning the life insurance provided by Primerica. But the insurance business – just like any other business – is not just about the product. The conditions within the company are equally important. Let me explain what I mean.
The conditions within
Imagine you are at the beginning of your career and the choice is to be a financial adviser. Naturally you would like to be successful and also respectable in what you do. To achieve that, you need the following three conditions: 1) have enough knowledge, 2) being able to choose from a selection of products that fits the needs of your clients and 3) be financially motivated.
Condition 1: With the company we are discussing, you will undergo a training concerning mostly the way to deal with a client, i.e. you might end up selling something you don’t really understand. Of course there are many experienced advisers within the company, but the truth is most of the clients are served by beginners, since those more experienced mostly concentrate on building their own team of advisors.
Condition 2: Unless you are an independent life insurance broker or independent financial advisor, you cannot shop around for a better deal, company or product – as simple as that. It makes no sense to me – to voluntarily limit myself to selling products of only one company. What if my clients need something else?
Condition 3: the commission you made do not fully belong to you, because there is a structure of people who recruited you, the people that recruited them, and so on. Additional 3 people will receive a portion of what you make. Therefore the reward paid to the actual seller is smaller than with competitive companies. So how to make the big bucks with Primerica? You surely know the answer by now: make your own team. Let me summarize: Primerica views its advisors as some kind of financial doctors, curing all the financial diseases of their clients. But wait a minute: I have never met a doctor that instead of attending the sick is in fact recruiting and training other doctors and then sharing a part of their pay. I have to ask again: if you really are serious about financial advising, why not do it full time without all this recruiting rubbish?
As I said before, I’m pretty sure there are some very good advisers out there in Primerica. But it gets easier to become a good adviser when you don’t limit yourself to one company, or one product, when you get a proper education and don’t have to share your hard earn money with other people.
Comment on the “Convertibility” section. Primerica’s term policies are exchangeable to another term policy after the initial 5 years for an equal or lesser amount of coverage without providing proof of insurability.
Comment on “Condition 1″: Most clients are served by experience licensed representatives who bring new representatives with them so that new representatives can learn and gain experience.
Comment on “condition 2″: While other companies may sell cheaper term life insurance, do they have the same quality as Primerica Life Insurance? What’s their ratings? What does their policy contain? Does it provide a full financial service, or just a partial service?
Comment on “Condition 3″: The seller of the life insurance receives full commissions base on his or her level. That commission is not split among everyone that is above that person. Instead, the company pays out overrides to everyone who is above that person. An override is the difference between the representative’s level and the upline’s level. So total payout from one sale can total 2-4 times more than what the client pays annually on the life insurance.
Here are some things that makes Primerica’s Life policies different from the rest:
Waiver of premium rider is the same as with all other companies. They all expire at the around the age of 60. Every life policy that I replaced that has Waiver of Premium in it says the rider will no longer be in effect after age 60. Unless client is currently on waiver, then the waiver of premium will remain in effect until the policy expiry date.
1) They sell one policy per family, not per person. I haven’t seen a single policy where both husband and wife are covered by one policy. So when you are comparing rates with Primerica, does that include husband and wife and kids or just for one individual? Other companies may be less expensive when selling to one individual, but the problem is that they don’t cover the spouse. A separate policy has to be sold to cover each member in the household. The more policies there are, the more expensive it becomes to own life insurance.
2) Rates are determined by total coverage in the policy (among other factors). So the bigger the coverage, the less it cost per unit. If other companies are selling one policy per person, how would that person be able to get discounted rates per thousand coverage? I can sell $250k coverage on both husband and wife for a total of $500k coverage and rate will be base on the $500k coverage, not $250k. The less coverage you buy, the higher the rate it is.
3) Guaranteed insurability to age 95. Probably not unique, but how many companies out there that sells term insurance guarantees insurability to age 95?
4) No war exclusion or clause. After Sept 11, 2001, Primerica paid all death claims. There were many companies that has and continue to deny to pay the death claim to victims who died from war or by terrorist act.
5) Terminal illness benefit is included in the policy, not as an option or as a rider.
6) Customized term policy. Primerica’s term policies can have multi-layer term insurance in it to fulfill each goal in case you die. You can have a 30 year term insurance to pay off mortgage, 10 or 20 year term insurance to make sure there’s enough money for your kid’s education in case you die, and so on. As time goes on, the need for life insurance declines as your savings boes up. Primerica teach clients to keep savings and insurance completely separate. Eventually you don’t need as much coverage. Therefore, you pay only what you need.
7) I think all companies offer child riders in their life policies, but many don’t give children the ability to buy their own life insurance when they reach age 25 without having to provide proof of insurability. Primerica does. When a child reaches age 25, he or she can buy their own life insurance policy regardless of current health conditions.