Can you explain life insurance rebating?
UPDATED: Sep 20, 2013
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Asked September 20, 2013
In life insurance, rebating is when the insurance agent who is selling you the policy gives up their commission on the sale, applying it, instead, directly to your life insurance policy, or as a direct cash-value rebate. Typically, the rebate is received in the form of a check which you can either invest in the policy of insurance yourself or use for any other desired purposes. It is a type of gift that agents can choose to give, in the form of money or a gift card, to a person when they purchase new coverage or sign new insurance contract. It is typically a portion of their commission income benefit.
Insurance rebating is not legal in all states. In fact, most states have specific regulations against insurance rebating. At this writing, only California, Florida and Michigan have regulations that specifically allow this practice and they are vastly outnumbered by those with anti-rebating laws. Because each state regulates insurance independently, check with your state's Department of Insurance to find out whether the insurance laws in your state have changed.
Similarly, even where rebating is allowed by law, it is often forbidden by insurance companies. This means that even though it is legal for an agent to offer you the rebate to get your business, the company he or she sells for does not want to be associated with the stigma attached to rebating, and will not allow their employees to use it as a tactic for selling policies.
If the cost of your policy of insurance has you concerned enough to consider taking the rebate, it might be a better idea to spend a few minutes shopping for a better agent or better insurance coverage that can give you lower insurance premiums, to begin with. Start on this site and get a free life insurance quote. The quote you receive will even be compared against the other leading competitors, and you may discover that you can purchase a policy more affordable than you would have gotten with a rebate.
Answered September 20, 2013 by Anonymous