Insurance is a critical part of any financial plan. While it may seem like a good idea to buy your insurance products from the advisor who created your plan, NAPFA advisors do not sell products such as insurance on a commission basis.
Below are three reasons to have one or multiple insurance specialists on your team:
Insurance companies refer to insurance sales force as producers. An advisor takes on a different role when selling an insurance policy – that of an insurance salesperson. The fundamental change in roles from an advisor who is paid for advice to a producer for an insurance company causes the client-advisor relationship to become more conflicted than may be appropriate. While you do still have to go to an insurance agent for insurance, NAPFA advisors believe their only duty should be to the client.
It pays to work with an independent insurance agency. The first point isn’t to say insurance agents are bad, a good agency can add significant value to your protection planning. Instead of purchasing your policies though from an individual advisor who may not be around when you need to draw on your policies, an insurance agency will be around for years to come.
Many provide an increased level of oversight, policy review, and policy-holder services than your financial advisor can. I recently heard a presentation from a long-term care agency which regularly reviews its client’s policies to make sure the protection and policy are still the best option. This sort of review likely won’t happen with an individual advisor. Many agencies have more experience in working directly with insurers and their underwriting departments to know exactly what a specific company is looking for, is willing to underwrite, and at what cost. You have a better shot at getting the best policy when you go to an insurance specialist; not an advisor who is a generalist.
You don’t know if you’re getting the best deal. Advisory firms may have a relationship with one insurer and favor them over another. By separating your financial advisor from any commission products you have the best of both worlds; an insurance agent who is a specialist, and an advisor who is a second set of eye on the insurance approach.
Insurance can be a specialized field. Not all insurance agents or agencies are licensed in or specialists in all types of insurance. It is difficult to be a specialist in everything when you are also providing ongoing financial guidance to families on a regular basis.
This outsourcing of work to those who are specialists is the preferred approach of many NAPFA advisors. Your insurance plan is too important to be left in an advisors hands who may not be a specialist.