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Web-only life insurance policies and annuities offer pared-down options

Insurance customers now have a choice:  they can go to an agent, or buy their insurance over the phone or on the Internet. Some insurance companies are now offering policies, only available on the web.

Web-only life insurance policies and annuities can offer major pluses. You can get coverage cheaper and faster, and you don't have to visit an insurance agency to buy them. Your choices might be limited, however. If you require a variety of features on your policy or annuity, you might be better off going to an agent.

When is buying insurance online the best option?

"To sell online, you want a nice, streamlined, simple product."

Some Internet-only life insurance policies don't offer much variety in regard to policy features. More complex life insurance products, such as whole life, variable life, and variable universal life, require more explanation than some web sites provide.  That’s why many insurers limit their online offerings to policies that are easily understood.

"A lot of these products that agents sell have every bell and whistle you can think of," says Arthur Fliegelman, vice president and senior credit officer at Moody's Investors Service. "To sell online, you want a nice, streamlined, simple product."

Annuities in cyberspace

In addition to life insurance, you can buy annuities that are exclusive to the web.

There are drawbacks. Some popular features on variable annuities sold through agents, including long term care riders, guaranteed minimum income benefits, and bonuses, are not available on web-exclusive annuities.

One advantage to many online annuities is the ability to make an unlimited number of transfers between funds and sub-accounts.

Hot commodities on the web?

As more people become Internet savvy and feel comfortable making major purchases online, web-exclusive insurance might be an attractive option.  Louisiana’s Insurance Commissioner, J. Robert Wooley, says anyone buying insurance online should make sure they fully understand the terms of a policy, before buying it.  “We’re glad to see understanding is on the rise,” Wooley says. “However, it’s still troubling that while two-thirds of adults feel they have the right amount of insurance, only one-third seem to fully understand what they have.”

Arthur Fliegelman of Moody's says online insurance providers have not done enough to give consumers the ability to service their insurance accounts, which includes paying premiums, changing an insurance beneficiary, or changing coverage. Fliegelman says online insurance providers need to make their services user-friendly, if they want to increase their share of the marketplace.

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