A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Car Insurance Agent Daniel Walker

UPDATED: Mar 22, 2022

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Many people see the value of purchasing life insurance to protect their families. However, the high cost of some premiums leads many to believe that they will simply not be able to afford coverage for themselves. While there is usually a policy somewhere that fits every budget, the demand for truly low-priced insurance has led some companies to offer a new product called “no-load” insurance, which is often much cheaper, at least at the beginning of the policy’s life, than traditional insurance.

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In order to understand how no-load insurance works, first look at traditional policies, which are divided into two basic types. Term policies are those in which a commission is paid over a certain “term,” or number of years, in exchange for a guarantee that a death benefit will be paid if the insured person dies during that time period. If the person does not die during the term, the insurance value vanishes and the insured’s family is paid nothing under the policy. People typically purchase term insurance because it is relatively inexpensive and provides an “instant estate” if something unfortunate were to happen to the insured. The insured is banking on the fact that the money he or she would have used to purchase higher-cost insurance can be invested, thus gradually accumulating to replace the benefit of the term insurance, if the person survives the time period covered by the insurance. This is an inexpensive way to provide true “insurance” for your loved ones against disaster, but it requires long-term planning to make it worth the cost.

Whole Life or Universal Life vs. No Load Life Insurance

The second type of basic insurance is whole life or universal life insurance. As the name implies, the premiums paid on these policies, which are generally higher than term, accumulate for the “whole life” of the policy as an investment and can be borrowed against if desired. If the value of the policy is intact at the time of the insured’s death, then the beneficiaries receive the proceeds, no matter how long the insured has held the policy. These policies build value over time and retain their value, making them good choices for people who want an investment for the future with a guaranteed payout.

No-load insurance combines the best of both of these types of policies. “No load” refers to the fact that the costs associated with insurance are extremely low, due to the lack of an agent’s commission. By structuring the application and approval process so that no commission is paid, the company is able to offer the insurance at a much lower initial cost than either term or whole life policies. These no – load policies often build in value according to the payments made, and can build value just as whole – life policies do. If the no-load policy is structured without accumulating value, the lower premium may pay for a much higher face amount than is possible with a regular term policy.

Although no-load policies sound like a great way to insure your family for a very small initial investment, you must be aware of all the terms and limitations of this practice. While there may be no commission paid to an agent for these policies, the insurance company still wants to make money, and may build in higher payments at a later time on the policy, or severely limit the payouts available if the insured dies. Because you do not have an agent, it is up to you to read the policy and decipher the “fine print” yourself. If you fail to understand something about the policy, it can end up costing you or your loved ones money and creating problems later.

Some experts claim that true “no-load” funds do not actually exist. While no commissions are paid to agents in some policies, they believe that the hidden costs are built in, usually as “application” or “processing” fees. Rather than pay this money to an agent, the company collects it for itself to cover the cost of clerical work, processing the policy, and any incidental expenses such as medical exams or other costs. Another term that has been coined to describe these policies is “low-load,”, which many experts feel is a more accurate description.

The Bottom Line

Choosing a no-load insurance policy may seem like an easy and attractive way to reduce your life insurance premium. However, finding an insurance company that will sell you a no-load policy isn’t easy; typing in “no load life insurance” on Internet search engines will in many cases lead you to an agent or broker.

If you are considering a no-load life insurance product, be sure to read the entire agreement very carefully. If you don’t understand the language used in a policy, it’s up to you to contact the insurance agent and ask for an explanation. Make notes of your conversations with the company so that they can be referred to later. If you don’t understand the insurance terms, you should seek out professional help

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