Life insurance agents earn hefty commissions, sometimes 50% to 100% of your first year’s premium. That means a $2,000 annual policy could put $1,000 to $2,000 in their pocket. While many agents are honest, this commission structure creates pressure to oversell coverage you might not need.

The solution isn’t avoiding agents entirely (they can provide valuable guidance), but learning how to shop smart and stay in control of the conversation.

Know Your Number Before You Shop

Calculate your actual coverage needs using the income replacement method. Multiply your annual income by 10 to 12 for basic coverage, then subtract existing savings and add major debts like your mortgage.

For example, if you earn $75,000 annually with a $200,000 mortgage and $50,000 in savings, you’d need roughly $900,000 in coverage ($75,000 × 12 = $900,000 + $200,000 – $50,000). Having this number ready prevents agents from inflating your needs.

Most major insurance companies offer free online calculators to help determine your coverage needs more precisely.

Stick to Term Life Insurance for Most Situations

Unless you’re wealthy enough to max out retirement accounts and still have money left over, term life insurance offers the best value. A healthy 40-year-old can get $500,000 in 20-year term coverage for around $30 to $50 monthly.

Whole life, universal life, and variable life policies cost 10 to 20 times more because they combine insurance with investment accounts that typically underperform. These products generate much higher commissions, which is why agents push them aggressively.

When Permanent Life Insurance Makes Sense:

• Estate planning for wealthy families facing inheritance taxes
• Business succession planning
• Special needs family members requiring lifelong care

For everyone else, buying term insurance and investing the difference in low-cost index funds typically builds more wealth.

Shop Multiple Companies and Question Everything

Life insurance prices vary dramatically between companies. The same coverage might cost $40 monthly from one insurer and $65 from another. Get quotes from at least three companies before deciding.

Key Questions to Ask Any Agent:

• “What’s your commission on this policy?”
• “How does this compare to term life insurance?”
• “What happens if I stop paying premiums in five years?”
• “Can you show me the guaranteed vs. projected returns?”

If an agent dodges these questions or pressures you to “act today,” walk away. Legitimate coverage doesn’t require immediate decisions.

Check the National Association of Insurance Commissioners consumer guide for state-specific regulations and your rights when purchasing life insurance.

Use Online Tools to Your Advantage

Several reputable online platforms let you compare term life quotes from multiple insurers without sharing your contact information with aggressive sales teams.

Before purchasing from any company, verify their financial stability through A.M. Best’s insurance company ratings, the industry standard for measuring insurer financial strength. Look for companies rated A- or higher to ensure they’ll be around to pay claims decades from now.

You can also research complaints against specific insurers through your state insurance department’s website to check their customer service track record.

Red Flags That Signal Overselling

Watch Out for These Pressure Tactics:

• Agents who won’t provide written quotes to take home
• Policies that seem too complex to understand easily
• Claims that you “must decide today” for special pricing
• Recommendations for coverage exceeding 15 times your annual income
• Emphasis on life insurance as an investment rather than protection

What to Do Instead:

Take time to research, compare options, and make decisions on your timeline. Get a second opinion from an independent agent if you’re unsure about recommendations from a captive agent (someone who works for just one company).

For additional guidance on avoiding insurance scams and high-pressure sales tactics, the Federal Trade Commission’s insurance shopping tips provide valuable consumer protection information.

The right life insurance policy provides peace of mind without breaking your budget. By knowing your needs, understanding your options, and asking the right questions, you can get appropriate coverage while keeping more money in your pocket.