Don't ever buy a Whole Life Or Universal Life Insurance policy!
Financial Advisors Get 100% Of The Premium The First Year.
A financial advisor can be a CFP - Certified Financial Advisor Planner.
A CFP is in sheep's clothing and can be greedy financial wolves selling whole life or universal life policys that pay them 100% of the first year premium as a commission.
This is all built into your policy cost.
For example:
If the whole life policy or universal life policy is $3,600 for the premium the first year the insurance agents gets - $3,600 commission for the first year you pay premiums!
Also your insurance agent keeps getting 2.5% of your monthly premium for the next 2-10 years! ($90.00 a year time 10 years = $900.00 more in commisions.
This is just for the insurance agent that sold you thw whole life or universal life policy.
Other "fees" are collected by the insurance company.
Whole life or universal life policys cost up to 10 times more than a term policy.
It can take 15 to 20 years before a whole life or universal life policy cash value will be worth more than the premiums you have paid over the years!
Your paying, fees, commissions and other expenses when you pay a premium monthly.
Can you say, "Scamarama Ding Dong?"
Listed below are links to document the above information.
Pay attention to the first link that details what a "scamarama" whole life insurance agent gets in commissions.
Note Schedule II.1 and II.2 Compensation Schedules
This is and example of how much a Whole Life or Universal Life insurance agent is paid in the first year and years 2-10 you pay premiums.
Here's Why You Should Avoid Whole Life Insurance Like the Plague
For life insurance agents who are employed, they may have a base salary plus a commission structure on the number of life insurance policies sold and the premium value of each policy.
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Agents receive anywhere between 40 to 115 percent commission on first year premiums
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Renewal of insurance gets them 1 to 2 percent commission, some companies pay between 4 and 5 percent as well based on market and policy value
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Whole life insurance plans fetch the best commission with 100 percent and above value of total premium paid by client in the first year
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Universal life insurance plans also fetch 100 percent and above commission value of the policy premium in the first year up to target premium
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Term insurance policies fetch lesser commission in comparison to whole and universal policies at the rate of 30 to 80 percent based on the insurance company.
To understand how commissions are calculated, let us take an example of a policyholder who purchases a whole life insurance plan at the age of 21 and has a premium of 1200 USD per year.
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The agent who sells this plan will make 100 percent of the first year premiums as his commission if the insurance company gives him a 100 percent insurance commission rate on new policies. (A Broker)
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This means that the agent will make 1200 USD for the first year. On just one new policy!
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If the renewal commission rate is set to 5 percent, then the agent will continue making 60 USD each time the policyholder renews the policy post the first year.
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So by selling just one policy, the agent will earn 1200 USD in the first year and 60 USD every year until the policy covers the policyholder.
One policy sold = $1,200 a week for a $1,200 new policy.
Two new policys = $2,400 a week.
Three new policys = $3,600 a week
Incentive Commissions
Hit by a drop in customers’ disposable incomes and a fall in new business premia, life insurers are pulling out all stops to ensure persistency rates remain high.
Now, the commissions and incentives of agents are being linked to persistency rates, apart from the business generated.
Agents’ commissions are calculated as percentage of the premium paid by a customer.
While the first-year commission for a new policy currently stands at 14 per cent, the Insurance Regulatory and Development Authority (Irda)’s new traditional product norms set it at 15 per cent.
In its non-linked product guidelines to be implemented from October 1, Irda has said commission rates for policies with longer tenure would be higher than those for short-term policies.
For policies with tenures of at least 12 years, the commissions would be 35 per cent of the premium.
So you can see how an insurance agent can make a "killing' selling you a policy that has the commisions paid because of the incentive bonus.