Primerica Life Insurance Review

Primerica Life Insurance Review

Overview

Founded in 1977, Primerica is a steadily growing life insurance provider in the United States. Though it is a fairly young company in the insurance industry, it has high financial stability comparable to more established companies like State Farm and Liberty Mutual that have existed for almost a century.

However, Primerica’s business model operates on a multilevel marketing model: it recruits people (sales agents) to sell policies, encouraging these new agents to start selling to family members, friends, and coworkers and recruit them to join the business as sales agents too. Primerica agents make a commission based on sales alone and get a cut of sales by agents they’ve recruited to the company. Because of this sales strategy, you may have heard about Primerica from friends and family who may not be incentivized to give accurate information, rather than a financial advisor or insurance broker who is bound by law to provide accurate advice. Let’s explore some of their life insurance plans so you're operating with the best information available.

PolicyScout Review

Primerica's slogan is "Buy term and invest the difference." What this means is that, unlike other life insurance companies with a diverse set of plans, Primerica only offers term life insurance. These plans, purchased through any company, are typically the lowest-priced life insurance coverage, and only provide benefits in the event of the insured's death, unlike other plans with built-in investment and dividends. Primerica's strategy is to provide financial services instead to "invest the difference" between a term life plan and a whole life plan. 

At PolicyScout, we typically recommend term life plans for anyone without a large income and investment portfolio, since (like Primerica argues) it's usually a better return to invest in other financial products. 

Follow the Money

However, we at PolicyScout would strongly recommend against purchasing both life insurance and investment products through Primerica for three big reasons:

Compensation structure - when you're buying insurance, the best way to know who's interests are in mind is to "follow the money." With most insurance companies, financial disclosures reveal just how much of their revenue from premiums goes towards things like marketing, operations, member services, and premiums.

When purchasing through a mutual company, you also have the assurance that any profits are re-invested into the business and member services. Commissions for insurance agents at most companies average about 5-20% according to research by US Insurance Agents. However, review of compensation documents released by Primerica show commissions upwards of 25% for bottom-level agents, with their upline earning an additional 10-70% of commission on policies. 

To make this more clear, imagine two identical insurance policies, one through a mutual life insurance company, and others through Primerica with the same monthly premium of $40/month for $100,000 in coverage. 

With a mutual company, you can expect that $36 of that premium is left after commissions for payouts, whereas with Primerica only $12 may be available. This means that policies with Primerica are necessarily either paying out a lower rates, meaning that your family might not get coverage when they need it most or (more commonly) charging significantly more premium for similar coverage. 

Mismatched Incentives - because Primerica operates as a multilevel marketing company, agents are strongly incentivized not just to bring on new policies, but to recruit new agents. The chances are if you've been approached about the company in the past, it was to join the agent downline a friend or family member.

While the business opportunity may sound exciting (exciting enough to offset the higher premium cost compared to other plans, for instance), research by the Federal Trade Commission reveals that 99% of MLM participants lose money every year after business expenses are accounted for. 

Hidden costs - Unlike almost all other term life plans, Primerica life insurance premiums increase annually. Consumer complaints reveal that this fact was usually hidden during the sales process. This means that the benefits of "locking in" a rate at a young age for life insurance evaporate with Primerica products. 

With its focus on term life, which is the least expensive form of life insurance, Primerica's largest clientele is middle-class families. The company offers both a medical exam and no medical exam policy options.

You may get lower rates if you opt for the medical exam (provided you are in good health!), but the no-exam option is a perk for those who have pre-existing conditions or health concerns. 

Pros: 

• Strong financial stability/A+ (superior) rating from A.M. Best 

• Increasing benefit rider 

• Options for exam-free coverage.

Cons: 

• Multilevel marketing setup means higher premium costs and worse coverage.

• No transparency, e.g., there are no rates and pricing on the website

• Term life insurance offerings only (no permanent) 

• Increasing annual premiums without a guaranteed rate.

Between the lack of information and transparency, coupled with the multilevel marketing sales strategy, PolicyScout does not recommend Primera. Other insurance options can provide more comprehensive coverage without the mismatched incentives of a Primerica plan.

If you know someone who is considering joining Primerica, we strongly recommend this explainer by the FTC on the hidden costs and downsides of multilevel marketing schemes.