The world of life insurance can be unfamiliar. Getting advice from a friend (or family member) who sells insurance seems like a good idea.
You know your friend. If you’re lucky, your friend:
- has a deep understanding of life insurance
- isn’t pushing you to buy
- will remain your friend if you don’t buy
Buying from a friend is convenient. You already know each other and meet from time to time. You may feel more comfortable asking “dumb” questions or asking for more scenarios.
You may get information that gives you more value for your money. For example, should you get term life or permanent life insurance?
You might get better service because your friend cares for you. You’re helping your friend too.
Your relationship can change if you become a customer. A true friend might refuse to sell you life insurance to preserve your relationship.
When you apply for life insurance, you disclose deeply personal information about your health and finances. Are you comfortable doing that? How good is your friend at keeping secrets from your other friends?
Finding life insurance prospects is difficult. Building relationships is an effective way to sales because trust makes buyers less objective. Hollywood and news reports show cases where close connections misused trust for their own financial gains. You may feel pressured to buy (or to buy more than you want) to help your friend. There’s implied pressure. If you want to reduce or cancel your coverage later, how will you feel?
After you buy, you may be taken for granted and get less service.
What’s the company name on your friend’s business card? If you see the name of an insurance company, your advisor is likely a “captive agent”, which means you can’t get access to the full range of products in the marketplace. You’re limited to what that company has chosen to offer. Your friend doesn’t have any choice.
If you think your friend is a good life insurance advisor but aren’t sure, get help. You can refer others to your friend and ask about their experiences. Now you have perspectives to compare against. Do they match yours?
There’s another way. Talk to your common friends—the friends that you and your insurance friend share. Have they bought? Would they buy? Would they give referrals?
The key question
Would you buy life insurance from your friend if they weren’t a friend? Deep down, you likely know.
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