Life Insurance: Avoid MLMs, purchase from Agents

Life Insurance: Avoid MLMs, purchase from Agents

Life Insurance

It’s not a fun topic to talk about, mostly because the basics of this kind of insurance is not about life, but death. We generally don’t want to talk about our own mortality, much less plan for the eventual inevitable.

Life insurance is a much more difficult topic to think about than it is to actually talk about.

Because of the difficulty of this subject, many companies have started utilizing the multi-level-marketing (MLM) format which emphasizes selling to people you know.

The problem with the MLM format

There are five main downfalls we have found with the multi-level-marketing format of life insurance.

  1. Agent dedication
  2. Marketing efforts
  3. Product direction
  4. Effective servicing
  5. Recruiting model

Before we get into these problems, let’s define a MLM organization and an agent.

Multi-Level-Marketing Organization

Multi-Level-Marketing organizations are companies with a group of offerings that focus on both product sales and recruiting. Rather than being a service and sales oriented company, they focus on selling a business model to prospects. For instance, World Financial Group (WFG), is a multi-level marketing company that offers various life insurance products. Their agents are taught life insurance basics, what anyone needs to learn to get licensed, and then are trained to recruit prospects to join their downline.

The downline is simply people an agent has recruited to work under them. Conversely, the upline is the people who recruited the agent.

Whether MLMs are legitimate businesses is a debate for a different website, as we here at Bow Tie Financial Group are all about insurance, not the nuances of what constitutes an “actual” business.

Most MLMs in the life insurance realm have a partnership with a few companies. WFG, for instance, has special contracts with Transamerica, Pacific Life, and a few others. People Helping People (PHP) has a special contract with AIG and, I’m certain, a few other carriers. Primerica has partnerships with Metlife, Franklin Templeton Investments, Lincoln Financial, and others.

You might be aware of a few other multi-level marketing organizations out there, such as World Ventures, Mary Kay, Amway, Avon, Jamberry, LegalShield, Herbalife, and innumerable others. There’s even a magazine periodical dedicated solely to the development of MLM participants.

All of these promise full-time income potential with part-time effort.

It’s time to dive into why, in our opinion, MLM life insurance companies are best to be avoided as life insurance consultants.

1. Agent Dedication

Agent dedication is critical. What do we mean by agent dedication, though?

We mean an agent whose primary focus in business is insurance. Who is solely focused on learning the policy types, differences between products, how each company operates differently, and wonky insurance nuances most people aren’t even aware of.

What else? Agents should be dedicated to their clients and to their carriers. Obviously their clients need to be properly protected. The carriers all have a demographic they best fit, usually represented by rate. Pairing the two up is really the thrust of the agent’s job.

Dedication also comes into play with longevity. If you have insurance questions about a universal life policy, or what some options are with a whole life policy after a few years of cash accumulation, you’ll need an agent who has been with you since it was the setup.

Speaking of setup, we need to make sure your agent is setting up your cash-value life insurance policy with your best interests, not maximizing their commission. Other than cash value, do you need a child rider, return of premium rider, or maybe a waiver of premium rider on your term policy? Do you even know what they are or what they do? These are all things full time agents know which many MLM agents don’t even have on their radar.

2. Marketing Efforts

This is a complicated part of this writing. Marketing is probably the most critical part of the prospecting and sales process, other than making sure things are written correctly.

MLM companies market to three distinct groups of people, on behalf of two entities. They market to

  • Current representatives on behalf of themselves
  • Current representatives on behalf of their specially contracted carriers
  • Prospective representatives on behalf of themselves
  • Specially contracted carriers on behalf of themselves

Agents have one job: marketing to prospects and clients.

What happens when you have a MLM company bringing agents to their annual convention, where their top one or two carriers talk about how great they are and how, without them, the MLM all these people “work for” would not exist? What happens when agents, who by their licensing, are in a position of authority, are lead to believe they’re superior to people with a job (which is often spoken derogatorily as a ‘j-o-b’) because they’re “owning their own business”?

Agents have, in our opinion, one job: match our clients up with the best program for their needs. The only thing we are superior in is our knowledge of insurance product, not business, life, or how to live.

Multi-level marketing organizations have an insular culture of us-first, largely because of their marketing. This results in an often cultist organization where people first represent the MLM company rather than the interests of their clients. Sure, they touch on the best interests of prospects, it just comes as one of the tools for the organization’s strategy rather than the root of the agent’s process.

So, to answer our first question, what happens when they bring agents to their convention and their agents buy into the idea of independence built upon the back of this organization? People are given options that are limited, at best, and duped into joining an organization that will suck them dry, at worst.

Agents are dedicated to marketing to new prospects to consult with them. That’s the daily marketing effort of the independent agent. We don’t want to recruit or sell a dream of owning your own business — we just want to set you up with an insurance program that benefits you.

3. Product Direction

Product direction is not a term the insurance industry uses. In fact, it’s a term we made up to describe the focus of how agencies position their products. It ties closely in with marketing efforts, though it slightly different.

A life insurance product is intimate. It is often the one barrier between your family’s success and destitution in the event of a death. It can be a cushion that lets you take time off for grieving and therapy after losing a child or loved one. It can save an entire matriarch’s legacy from ruin.

Life insurance is often the one protection between destitution and success


The one direction product for full-time life insurance agents is toward clients. It’s finding the blend of term, cash value, and long term care. It’s figuring out whether juvenile life is best set up as a whole life to help fund college, or if it’s more advantageous to set it as part of the parents’ coverage.

Our one goal is to build a client for life, as it were.

Furthermore, product direction is based in experience. A direct agent will have a team of underwriters backing them to answer any questions they have. Many even long-time representatives with MLM organizations are still in a beginner level of knowledge with how to set people up properly.

Agents’ products are focused on client protection, growth, and development. We are experienced and backed by teams with an immense collective knowledge focused on selling the right product, not selling mass quantities of product.

4. Effective Servicing

Servicing applies to more than a missed payment or adjusting how much you put into your indexed life insurance policy. Servicing is anticipating your needs when you call in with a problem. It is a periodic review of what you currently have and suggestions on how to move forward.

Servicing is critical to insurance, especially life insurance. It comes from a desire to maintain good relationships and empower people to maintain knowledge and control over their assets and life. Servicing is one of the most powerful tools in an agent’s set.

Speaking from experience, servicing through a MLM representative’s perspective and from a direct agent’s perspective is wholly different. A representative with a MLM does not own their book of business. What that means is while they have access to it, it can be taken away at any time. A direct agent owns their book and is able to stay on top of any issues faster.

What that means, for you, is one less layer of red tape to cut through on the day before payday when you realize there’s a little more month left than there is check, and you need to adjust something. It means that direct agent is more likely to be able to pull you out of a sticky situation. It means that question you have about your unique underwriting case has fewer steps to get through for a solid answer.

It’s the difference between a policy being issued in days and one being issued in weeks. It’s often a 10% difference in premium, whether $18/month vs $20/month or $270/month vs $300/month. Oftentimes it even comes down to accuracy against speed.

Direct agents are more flexible and empowered to service their — our — clients. And we’re proud of it.

5. Recruiting Model

Most of this comes down to the recruiting model multi-level marketing organizations employ. In order to make recruiting attractive, there are weaknesses built into the representative’s business plans.

One of the largest problems is commission: a MLM representative’s commission is significantly lower and will still only go up to a fraction of a direct agent’s rate unless they can become among the top 5% of recruiters (recruiters is emphasized because amount and quality of sales don’t contribute to their commission).

We don’t work for free, of course, which is why we need commission. Our consultation to help you find, apply, and be accepted for the right insurance plan is our commission. It’s what keeps our lights on, our fridges stocked, and our tanks full. It feeds our pets, raises our children, and gives back to our community. The commission paid out on a policy is the same, whether it goes to a MLM or direct agent. It’s just your direct agent gets a higher commission because they’re empowered to service and work on your policy. The MLM organization absorbs 30-75% of the commission (usually on the higher end) to maintain their organization.

What this pay cut means is instead of being solely an insurance consultant and agent, MLM representatives have to recruit to survive and grow their business. This makes their friends, family, and insurance prospects potential downlines, to participate in these cut-rate commissions and recruiting models to train their own competition masked as teammates.

Direct agents only sell, service, and manage policies. We do not recruit.

In Conclusion

As distasteful as we find the vast majority of multi-level marketing organizations, we don’t wish to discourage people from joining them should they find a fit. Much like food, we can’t fault people for enjoying what they do. I, Eddie, the author of this post and president of Bow Tie Financial Group, cannot stand eggplant, yet I don’t think people should never eat it if it suits them.

This is more a warning, a tip, something to encourage people to take a second look at the organization they’re purchasing something so, so critical from.

Direct agents are local business owners with full stakes in their business. We are people who dedicate ourselves to knowing what you don’t know, and what you don’t want to know. We ask ourselves each day “What do I know? What do they need to know? Have I told them it yet?”

Keep it local, keep it in your community, and keep it in your best interest. Go direct.

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7 surprising things about final expenses

I lost my grandmother in late June and, while my work has helped prepare me for many things associated with final expenses, I was still surprised by much.

1. The fees

First are the fees. All the fees. Fees to get the death certificate, fees to open the plot, fees to fill the grave, fees fees fees. Fees if you want to cremate, fees if you want a burial, fees if you want an urn, fees if you want a basic casket, fees if you want something extravagant.

My family was lucky in that we had a wonderful funeral arranger and liaison with the cemetery. They were so absolutely respectful, which I understand is not necessarily the norm for this industry.

What you need to realize is that you may have an idea of what the funeral will cost, but there are myriad tasks that need to be ironed out during the planning process.

2. Funeral and internment costs are separate

Yes, there’s a strong chance you’re having the funeral service next to the gravesite or, maybe you’ll have it at the chapel on the premises. Perhaps the service will travel from the chapel to gravesite. Maybe you’ll have the service in a house of worship (church, synagogue, mosque, etc.) and then a processional to the burial.

Regardless, you will be billed for two things: the funeral and the internment.

If your services are held offsite, that makes sense. But if they’re all under the same house, it can be a surprise. It makes sense, though: the funeral is purchasing a service, the internment or burial is purchasing a product and/or piece of land.

3. Health department release to bury

I know: reading it gives you a reaction of “Really?!” at first, but as soon as you ponder it, it makes sense. You’re taking a body and putting it in the ground, where, G-d forbid, it could flood or other things could happen. The government needs to make sure that, worst case scenario, there are no infectious diseases or toxic problems that could contaminate the area.

4. Death certificate may not be needed

Life insurance, one of the most important things you can purchase, often needs a death certificate to get the full payout on a large policy.

For small policies like “burial policies” or just to get a small advance on a larger policy, the companies will often only need confirmation of the obituary or other public record.

The great thing is, if you have only a small policy to claim on, it’s one less fee because you have one fewer death certificate to order. The terrible thing is you have to make that claim in the first place.

But what’s a burial policy or a larger policy?

Burial policies are whole life insurance policies that are for significantly smaller amounts, amounts that are usually only enough for a dignified burial (hence their name) or final expenses. Larger policies are good for covering mortgages or college expenses in the case of the family’s breadwinner’s death, or covering childcare costs in the case of the death of a stay and home parent. Other policies can be structured in a way to help supplement income during your golden years.

5. How quickly costs add up

We’ve all had the craving for a burger late at night. And we go to our favorite burger spot thinking oh, you know what, $5 for a burger and I’ll be great. But it never works out that way. We drop a Lincoln on the burger, but another $1 on the cheese, $2 more for fries, and heck, we’re already here, let’s get another patty for $2. Oh, and a drink. Before you know it, you’re at $15 for what was supposed to be a quick burger run.

I hate to compare a funeral to food, but it’s extraordinarily similar and, I feel, something my grandma, may she rest in peace, would enjoy (my last meal with her was a burger).

I’ve already spoken about the internment costs, the burial costs, fees, and other costs. They seem like things that come in slowly, but it’s less of a trickle of fees and more of an order that builds up within hours to, at most, days. You’re looking at a couple thousand dollars here, a few thousand there, hundreds of dollars for each of a few necessary services, and before you know it, you’re staring at a bill for $12,000 that needs to get paid before you can move forward. That is only a conservative estimate for only the bare essentials. You also want to make donations in their memory, get booklets for the funeral, get a headstone, and various other things that send their memory off in dignity and warmth.

6. The immediate financial shift

Let’s take, for example, the “standard” family of television. A working father, stay at home mother, and 2-6 kids. I understand this is no longer the standard layout and delegation of a family, but I have faith that you can identify the individual tasks and roles that one might take in this day and age.

What if the father dies?

Their family loses their main source of income and the mother will have to go to work, hire a babysitter or nanny or send youngest off to daycare. On top of that, she will likely have to organize or coordinate rides for the children from school (assuming they’re not home schooled, which, if they are, they’ll have to go to public or private schools so the mother can work).

What if the mother dies?

Their family loses the anchor at home. They lose the person who does the majority of cleaning,  food preparation, and child care. The person who runs around and takes the burden of time and attention off the one who has the traditional job is gone and suddenly the breadwinner’s attention has to be focused on both home and work. Workdays become choppy and less efficient as they take days off and leave early to help the kids out.

What if, G-d forbid, a child dies?

Their family has gone through something no family should ever have to. The natural order of raising kids, seeing your parents die, having grandkids, and dying before your children is hard wired into us. Losing a child has a special place in the religious tradition I was raised in, and knowing from a number of friends who have lost children, it’s a very appropriate place.

But that heartbreak comes at a very real price — and money won’t help it. But what money will do is give those parents and children time off to mourn and take care of themselves. It will help them seek much-needed therapy. It will help build memorials and bastions of good influence for the family.

Eddie, that’s all well and good for the typical family, or even other families. What if we’re retired or getting ready to retire?

That’s an excellent question. And if you’re retired, or aiming for it, things are different. Your kids are gone, your liabilities are less (less of a mortgage, probably fewer car payments, no children to support, etc.). Maybe you’re fully retired and are living off investments, cash value life insurance withdrawals, a well crafted annuity, and/or social security or a government pension. Maybe you only have social security.

If you don’t have that government pension, cash value life insurance, strong investment, or annuity, you might be in trouble. See, if you’re on social security, once your spouse dies, what you get from their fund is generally cut in half. Studies show the vast majority of senior citizens live paycheck to paycheck. Cutting one of the checks they receive in half would be devastating.

Any of these scenarios presents an immediate and massive financial change in the family. And, to be honest, it terrifies me every single time I talk about it.

7. Religious differences

Did you know that Jews and Christians are generally buried facing different directions? Jews are buried with their feet toward the East, Christians with theirs toward the West. Muslims are usually buried with a bit of a more intricate calculation: they’re feet are pointed toward Mecca, Eastward in the US, but aligned more precisely than simply East.

Headstones are culturally different for each religion, as well. The symbols and markings on each vary based not only on their religion, but on the more minute social customs of their particular group. Even down to the burial, a simple casket which is required to touch the ground for more observant Jewish burials to more ornate caskets that can be stacked for other religions.

The differences in religious customs, or even just the personal desires of the deceased, are absolutely fascinating. Some people want to be organ donors, others don’t. Some want their bodies donated for science and study, others are terrified of that notion. Some want ornate caskets, some want cremation, others want to be buried in a shroud and have a tree planted on them.

I find what people want for their body once they no longer occupy it to be utterly fascinating.


If you’re not ready for final expenses or just want to see what you may or may not have, please call us today.

Why should you insure both parents?

Before reading on, please understand that this article deals with what some may consider to be an exceedingly tough topic: death.  No death of a loved one is ever timely, and we respect the space and emotions people need to cope with it.  That said, there are financial burdens associated with it, and this article is meant to help inform about those.

There are many options to consider when choosing life insurance.  Term versus whole versus universal, how much, whether you need a long term care rider and/or a critical illness rider, and many other options.

One of the biggest options is whether or not to insure both parents.  Many people think the breadwinner is the only one that needs coverage, but I’d like to dispel some of these myths today.

It used to be misunderstood that being a stay-at-home parent and/or the more domesticated half of the couple was not a full-time job.  The majority of people now understand this is not the case; being a stay-at-home parent is absolutely a full time job, regardless of an associated monetary paycheck.  If that at-home parent should die unexpectedly there will be many roles the surviving parent will have to fill, either by themselves or with hired help.  Having a nanny, cook, housecleaner, or any other domestic help can be expensive.  Life insurance is able to help cover these costs.

Taking time off work to help with the children mourning and to help one’s self heal is absolutely necessary.  There are also further costs for child therapists and even adult ones, which are terribly helpful in times of crises and to help heal.  Life insurance can help pick up this tab.

There are a number of external costs that need to be covered, associated with death.  Whether those are medical bills from emergency responders or hospice or repairs to a structure after a particularly bad wreck that weren’t covered by auto, life insurance can help cover those.

These are just three quick reasons on why the non-working parent, should your family be fortunate enough to have one, be insured.  There are countless more.

If you have any questions or to sit down for a free life insurance consultation, please contact us at your first convenience.

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