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INSURANCE CENTER: Basics

How important is having an agent?

Insurance Basics
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Insurance agents may have a less-than-golden reputation as a group, but when you think about it, this stereotype is mostly based on sales practices. Nowadays, with Internet resources at your disposal, you can educate yourself to avoid shady sales practices and select an agent that offers real value. It comes down to personal preference.

Term life insurance is cheap and simple enough that most people can make an educated purchase, start to finish, on the Web or by phone from a direct insurance provider. On the other hand, long-term care insurance is about as new, complicated, and expensive as it gets. Even after extensive Web research, many people will still benefit from the services of an independent financial planner, particularly one with experience in long-term care issues.

Auto, home, renter's, and disability insurance fall in the middle. They aren't all that complicated, but they are much more likely to lead to a claim than life insurance. When it comes to making a property claim, an effective local agent can be worth her weight in gold. Also, with liability and medical claims, procedures can be very tricky and decisions are rarely clear-cut. A proactive agent can be an invaluable guide. Of course, it always depends on the agent, the circumstances, and to some extent, the way the company handles claims.

In addition to the traditional insurance agent, there are a few other options. An independent insurance agent represents a number of insurance companies and can more objectively weigh pluses and minuses across many companies and types of insurance.

Although we Fools tend to be stubborn about doing it ourselves, a good financial planner can build insurance into your overall financial plan, should you or your situation call out for a professional. The key here, again, is independence. Work with a fee-only financial planner. Many insurance salespeople masquerading as financial planners will be all too happy to help you out, up to the point where you decide you're not interested in the product they're pushing.

An agent can also help you with an annual insurance review. As your life situation changes, so do your insurance needs. Probably the simplest example is life insurance. The bottom line is that most people need less life insurance every year, as they build savings and approach retirement. On the other side of the coin, most people don't need any life insurance until the baby arrives. You might want to drop collision and comprehensive insurance when your car reaches "licensed battering ram" status. And so on.

So, even if you'd prefer not to sit down with an agent, an annual insurance self-review is a good idea. And, as questions arise, Fools are always ready and willing!