The internet has
changed the way we purchase many items and life
insurance is no exception. The trend towards
term life becoming a commodity was already starting
but the internet gave it the final push over the
cliff. What fell was
life insurance rates and
this has generally been good news for life insurance
shoppers. Let's take a closer look at what
life insurance as a commodity means to you and how
to best take advantage of this continuing
First, what is
a commodity? Essentially, a commodity is any
product or service which becomes less
distinguishable in price and or qualify from
suppliers. Toilet paper is a perfect example
regardless of promises made in commercials.
You can go one step further down the chain and find
raw minerals and supplies such as wood pulp and
copper (the more traditional use of the word
commodity) but it applies equally well to any
product for which there is not much advantage to
purchasing from one supplier versus another.
To contrast, cars are definitely not a commodity.
There's such a wide array or pricing, models,
options, and levels of quality/service that cars
might be the opposite of commodities.
life insurance? In spite of the slogans,
sayings, and product statements made by life
insurance companies, there has been a constant move
towards commoditization in this industry. This
is good news for you. One of the first things
to happen when a product becomes a commodity is that
the pricing band narrows. This means that the
difference between the most expensive and the least
expensive life insurance plan on the market becomes
less over time. Why is this important?
It means you are more likely to get a better rate.
If you really think about it, term life insurance is
pretty similar in its intent. There's only so
much variation that enters into the equation.
This is very different from health insurance where
you have a range of everything from basic hospital
plans to full blown HMO which are based on an
entirely different model. Aside from the
term and whole life insurance,
there's only so much a carrier can do when comparing
apples and apples. Riders, of course, add an
extra dimension but core life insurance protection,
especially in the realm of term life is pretty
similar. So why would there be price
discrepancies...especially larger ones? That's
the opposite of commoditization and we can say it's
an inefficiency. Of course, to the life
insurance company charging more for their product
than the average cost, it's extra profit (or masks
poorer management). As you can see from our
life insurance articles, our take is from the point
of view of the life insurance shopper so this
"inefficiency" inherently means you're paying too
much. That's bad.
anyone pay more than they should? The simple
(and mostly correct) answer is that they don't know
any better. This is where the internet has
shopping for life insurance to your
advantage. If a captive life agent/life
insurance company is only showing their products,
than you're more likely to pay more by default.
There may be other carriers or plans that for one
reason or another, price better for your given
situation (health class, age, area, term amount,
etc). You'll never know.
has leveled the "information playing field" and life
insurance is all information. There's no
physical product. We immediately recognized
this and provided our instant
term life insurance
quoting engine. By providing multiple
carriers, plans, and life rates to you one site, we
are helping to commoditize the purchasing of life
insurance. If only purchasing cars was so