Friends Don’t Let Friends Sell Them Life Insurance

Friends Don't Let Friends Sell Them Life Insurance

Has this ever happened to you?

A friend, or maybe a family member, calls you up and asks you out for lunch or coffee so you can catch up. They offer to pay, so of course you say yes!

You get there and wonder why they’re a little dressed up, but you don’t really think much of it. They probably just came from work.

The two of you sit down and start talking. Maybe it’s been a little while since you last saw each other and there’s a lot to catch up on. You order some food with the special joy of knowing that you aren’t the one paying the bill. Life is good!

Then, all of a sudden, the conversation changes. Your friend mentions how great it is to hear about your job and your family and asks if you’ve given any thought to securing your financial future.

Wait, what? Where did that come from?

As it turns out, your friend is now working for Life Insurance Company X and he’s really impressed with how well they take care of their clients. So he’s wondering, are you familiar with life insurance? Do you know how it works and how it can protect you?

You’re caught off guard by this turn of events, and honestly you feel a little embarrassed talking about money. And you probably aren’t intimately familiar with the ins and outs of life insurance, so you reply politely but with some hesitation.

Meanwhile, your friend keeps it casual like this is all no big deal, and asks if you’d be interested in meeting again sometime soon to talk a little more about the benefits of life insurance, just to see if he could help you build some financial security. And again, being caught off guard and not wanting to offend your friend, you agree.

A few days or maybe a couple of weeks later, you’re back with your friend. Only this time it’s a more formal setting and you know you’re there to talk about life insurance. Maybe your spouse or partner is there with you too.

Your friend asks some questions about your financial situation and then launches into a compelling story about the power of life insurance. You find out that life insurance is not only a good way to protect your family today, but that it’s actually one of the best ways to build wealth for the future too. Who knew?

By the end of the meeting this life insurance thing is sounding pretty good. But you’re still not 100% sure about everything, because you’re really just learning it all for the first time.

But this is a friend, someone you trust, and someone you definitely don’t want to let down. So now it’s time for the big decision…

Should you trust your friend and buy the life insurance they’re recommending?

The short answer: No

The situation above is so common that it’s comical. It’s happened to me multiple times and I’ve talked to countless other people who’ve been through the same thing.

And the truth is that your friend is probably coming to you with good intentions. You are friends after all, and he almost definitely feels like he’s genuinely trying to help you out.

But none of that matters. No matter how well-intentioned your friend is, and no matter how much you trust him, it’s almost never a good idea to buy life insurance from him.

And are the few reasons why.

  1. With some exceptions, your friend is almost certainly not a financial expert. It’s much more likely that this is his first job in the world of finance and that he’s only recently been trained by the company that hired him.
  2. The training he received was all about how to sell the company’s products. He was not trained in comprehensive financial planning, because that’s not what he’s paid to do. Which brings us to…
  3. Both he and the company he works for are paid when he sells that particular company’s insurance products to people like you. That’s how he makes money. The more he sells, the more he makes.
  4. He’s paid particularly well when he’s able to sell whole life insurance, which is almost never good for you.

All of which means that this is a person who is fairly new to the world of finance and whose primary incentive is to sell you a lot of insurance from one particular company.

This is not someone who is trained to review your entire financial situation, assess all of the financial opportunities available to you, and make objective recommendations based on what’s in YOUR best interest.

That’s not your friend’s fault. It doesn’t make him a bad person. He’s just not in a good position to give you good, objective financial advice.

Which is why you should say “no thanks” and move on to a different topic of conversation.

What if you already bought life insurance from a friend?

If you’ve already bought life insurance from a friend, don’t worry. I actually did this myself a while back. It’s pretty common, and in most cases it’s pretty easy to fix. It will take a little bit of work on your end, but the savings could be pretty significant.

The steps you need to take depend on whether you bought term life insurance or whole life insurance from your friend, so let’s walk through each one separately.

1. Term life insurance

There are a few questions you should ask yourself to see whether the policy you have now is the best deal available. Below is a quick summary, and you can refer to the following guide if you’d like a comprehensive overview: The New Parent’s Guide to Life Insurance.

First, do you even need life insurance? If you have children, the answer is almost definitely yes. If not, then you may not actually have a need. It all depends on whether there’s someone who would suffer financially if you die.

Second, if you do need life insurance, how long will you need it for? Generally, you’ll want insurance long enough to cover the entire period during which people are financially dependent upon you. For parents, that typically means covering yourself until your youngest child is out of college and therefore able to provide for him or herself. Past that point, you likely won’t have a need.

Third, how much life insurance do you need? Life insurance agents have an incentive to sell you the biggest policy they can, since that’s how they maximize their commission. But if your actual need is lower, you could save yourself money by switching to a policy with a smaller benefit.

Finally, are you paying the lowest price for the protection you need? If your friend represents a particular insurance company, he probably sold you a policy from that company rather than shopping around. Even if you don’t change anything else about your coverage, you might be able to get a better rate from a different company. My favorite quote engines are from PolicyGenius and term4sale, and you can research more ways to get life insurance here: 5 Ways to Buy Life Insurance.

After going through all of that, if you find that you can save yourself money through some combination of different coverage and a different insurance company, bring that information to your friend and see if they can match the price you found yourself. If so, great! You can save money and help your friend keep some of his commission. Win-win.

But if he can’t or won’t do it, it’s time to cut ties and get the life insurance you need on your own. Just make sure to get your new policy in place before canceling the old one. The last thing you want is to find yourself without coverage when you need it.

2. Whole life insurance

The situation is a little more complicated if you bought whole life insurance from your friend, simply because these policies are much more complex.

In general, I’m not a fan of whole life insurance. It’s much more expensive than term life insurance, often costing 10 times as much for the same amount of coverage, and most people don’t need life insurance for their entire lives. It’s just not necessary.

But whole life insurance is usually sold as an investment opportunity, and this is what really gets me. Whole life insurance is almost never a good investment. There are rare exceptions where it can be useful, but you need to be making a lot of money and to have exhausted all your other investment options before even considering it.

The tricky part is evaluating a whole life insurance policy that’s already in place. Because those first few years are the worst from an investment standpoint, and if you’re already past that point your policy at least has a chance of performing reasonably well in the future.

Here’s how I would approach it:

  1. Request an in-force illustration of your whole life insurance policy. This is a document that projects the future growth of your policy based on where it stands right now and the insurance company’s predictions about the future.
  2. Take note of the current cash surrender value. That is the amount of money you would get in your bank account if you canceled your policy today.
  3. Pretend that you have that cash surrender value in your hands right now and you can do one of two things with it: 1) Invest it in this whole life insurance policy, or 2) Invest it elsewhere.
  4. Make the decision between those two options based on which one you think will give you the best chance of reaching your personal goals going forward.
  5. Remember that the money you already put into the policy is irrelevant. That money is already spent. You don’t need to wait for your policy to break even or anything like that. The cash surrender value is yours and all you need to decide is what you want to do with it going forward.
  6. If you’d like some help evaluating your options, consider working with a fee-only financial planner who can give you honest, objective advice. Feel free to check out the services I offer here.

Friends don’t let friends sell them life insurance

There are certain things that are great on their own but don’t mix well. I like ice cream and I like cheeseburgers. But cheeseburger-flavored ice cream? No thanks.

Friends are good. Life insurance done right is good. But buying life insurance from a friend is usually not a good idea.

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19 Comments... Read them below or add one of your own
  • Karl March 31, 2017

    Well said. I’ve been on the receiving end of that “free” lunch a time or two. I had to learn how to just politely say “no, thank you.” These people are trained to have an answer to every excuse, so I don’t give one because they will treat that as an open door for a rebuttal.

    I’ve even gone to the point of having my best friend be on notice that he’s to intercept these conversations for my wife should something happen to me.

    • Matt Becker March 31, 2017

      That’s smart planning ahead Karl. And you’re definitely right about the persistence. They are very well trained to not give up easily.

  • Josh April 5, 2017

    I’ve had this happen right after college (indirectly). My friend & I were eating and suddenly the conversation changed to planning to the future like life insurance, annuities, etc. I’m glad I didn’t purchase as he ended up changing companies because it’s tough feeding a family as a life insurance salesman.

    • Matt Becker April 5, 2017

      It’s definitely a high-pressure job. Good to hear you held out!

  • The Money Wizard April 5, 2017

    I’m always thrown off by this. I’ve had it happen to me a few times, and it’s always more disappointing than anything else. I usually hear from a long lost friend and think to myself, “Yeah! It would be great to catch up.” By the end of the lunch I’m feeling like nothing more than a few dollar signs to the “old friend.”

    Interestingly, these have stopped since word has gotten out around my friends that I’m a money blogger. Maybe the salesmen aren’t as confident in selling whole life insurance to people who know a thing or two about money?

  • CoupleofCents April 5, 2017

    This happened to us when we were just out of college. A friend approached us about Variable Universal Life Insurance. She was in training and brought her mentor. We got sold on the benefits of tax shelters, overfunding the acccount, blah, blah. We didn’t even make enough money to max out our 401Ks or IRAs. We got sold. Took me 2 years to realize it was a big mistake. Almost impossible to tell how much you were really paying for the insurance portion.

    I only just got term life insurance recently with the birth of our first child. I went through policy genius.

    Good read. Thanks.

    • Matt Becker April 5, 2017

      This is so common but I honestly can’t believe that people get sold these policies when, as you say, they aren’t yet maxing out all of their tax-advantaged retirement accounts. There isn’t a single financial planner who doesn’t sell life insurance that would say that’s a good idea (unless there’s a specific permanent insurance need, in which case you’d get a specialized policy that provides the necessary insurance at the lowest cost possible).

  • Mrs. Farmhouse Finance April 8, 2017

    This sounds all too familiar. Our close friend is an insurance agent, so he sold us car insurance, renters insurance, and most recently, life insurance. We are building a house, so the loss of one of our incomes would be a very big burden, so I think life insurance was a good idea. We took out term policies for 20 years that pay $250,000 if one of us dies. I have no regrets about buying life insurance, but I’m still deciding if the Return of Premium policy was the way to go. We pay a little more per month, but if you survive the 20 years (which is the idea), you get back all the premiums you paid. I understand the insurance company makes money off the interest, and I probably could have done better investing the difference myself, but what can I say, I’m loss averse. I didn’t want to lose the money that we paid for the premium for 20 years. That being said, I KNOW FOR A FACT that we could do better with car insurance through another company, but we feel bad switching on our friend. We’re waiting it out until he moves (likely later this year) to another state, and then we’ll make the switch. Lesson learned: friends and insurance do not mix. Great post!

  • Chris Acker, CLU, ChFC January 22, 2018

    Hi Matt-

    I’m on the other end of this issue. I entered the life insurance business directly out of college in 1985. I’m in my 33rd year…

    Your story, while completely valid, somewhat does a disservice to the life insurance industry and its professionals today. When I started, young agents, or “green peas” were trained on specific products that their primary companies offered. Most new agents know those products well before they go into the world selling insurance. If you’re talking about young friends who are just out of college, with no disposable income and no families to protect, then I agree with your premise to not buy life insurance at that time in your life.

    However, your title suggested that one shouldn’t let their friends EVER sell them life insurance– and there’s my issue. Generally, people like to work with someone they know and trust. Millennials, and this Boomer, love to research the crap out of whatever we’re buying, then typically after the 7th time researching the subject, we like to buy from a human being who knows what he’s talking about.

    When I started out dealing with folks close to my own age, I approached the disability insurance need, which we all have a huge exposure for. I was not trying to convince folks to buy whole life insurance, although I did convert many term life insurance policies I sold 20+ years ago as my clients aged and their health problems started–diabetes, hypertension,cholesterol Parkinson’s, etc. Then permanent insurance, not whole life, make a lot of sense.

    These days, young folks want to buy life insurance online. With the exception of Haven and Ladder you still pretty much talk with a live human being. In fact, with haven, Ladder, Quotacy, PolicyGenius, et al, if you are outside the risk box, you will definitely need to chat with an insurance pro. Then, you’re at the mercy of a large call center. Very few call center agents are credentialed professionals. Retention rates at those places are lower than career agent retention rates as well, due, anecdotally, to the fact that call center employees don’t own their clients and have zero incentive to continuing to service clients… It’s a different mentality…

    I myself, have embraced the digital age and run my own term insurance quote site and in fact use the same software you referenced at term4sale. With smaller online brokerages, you can have the benefit of local helps/small firms and 33+ years of experience oftentimes.

    Anyway, I would recommend a title change on this article to something more appropriate. After all, who was YOUR first client? 🙂

    Chris Acker, CLU, ChFC

    • Matt Becker January 23, 2018

      I appreciate your perspective Chris and I agree that it isn’t always a bad idea to buy life insurance from a friend. There are plenty of good, honest life insurance agents, and if your friend is one of those people, by all means you should feel comfortable working with him or her.

      The point of this article is to highlight the dangers of a particular type of situation that is, unfortunately, all too common. But your input is helpful as well.

      By the way, my first client was a complete stranger. As are pretty much all of my clients 🙂

  • Chris Acker January 23, 2018

    Hey Matt,

    Thanks for the reply. My first clients were strangers as well! Cold calling was a big thing back then… I agree about the situation you describe. I was always trained to be upfront and transparent about my appointment setting. It’s the same with caller ID. I would much rather have folks know what I do than to be devious about why I’d want to have lunch/coffee/breakfast out of the blue. I do think that the situations that rub the people the wrong way are ones where you haven’t maintained the connection for years. I certainly am suspicious of those folks as well.

    I appreciate your efforts and this blog, so thanks for replying and letting my comment stick!

  • David Simmonds August 11, 2018

    Actually, everything you explained is really stemming from one philosophy you seem to have. Which is, don’t buy life insurance from an agent. The only difference with a friend of course, is that you are more likely to feel pressured because of the friendship.

    • Matt Becker August 13, 2018

      Actually I think that working with a good agent can be incredibly helpful. I have a team of independent insurance agents that I use when I guide my clients through the application process, and finding an agent is one of the options I recommend exploring here: The New Parent’s Guide to Life Insurance. It’s just this specific situation that people need to be wary of.

      • Steve August 17, 2018

        Many independent brokers don’t work closely with underwriting and waste more clients time and energy than needed. Not to say they aren’t helpful but a good friend who you trust to steer you in the right direction will always be better than a random person who represents everyone.

        • Matt Becker August 21, 2018

          I think that in some cases a good friend can also be a trusted advisor. And in other cases the trust that they’ve earned as a friend is inappropriately translated into trust as a professional. So while I understand where you’re coming from, I think the idea that a good friend will “always be better” than a professional you aren’t friends with is misguided.

  • Steve August 17, 2018

    I ageee with you Chris.

  • Mary November 2, 2018

    Thank you for writing this!! I got a strange text from an old friend so I googled “old friend selling insurance” and this popped up. Such a lifesaver; I now feel like I can tastefully prepare for the situation ahead. THANK YOU!

  • Lee McAllister September 30, 2019


    I view this from the other side. I was embarrassed, as an agent, to sell life insurance to my friends…until one of my best friends died, and his widow looked at me not too long after the funeral and asked why I didn’t try harder. And from that moment, I have never failed to ask that question, but in a different way. I also take exception to the fact you are advising insurance coverage to stop after the kids are out of college. I would recommend it to last until one retires, to cover lost income. Insurance is preparing for a death today, not 5, 10 or 15 years from now. I’m okay with your term vs. Perm take, but there are good reasons for both. Thanks for the opportunity.

  • Kevin November 22, 2020

    This just happened to me the other day, and I am surprised to hear that it is a common situation. It upset me greatly and I believe coming from a place of deception is no way to begin a relationship- even a client/provider relationship. And it was definitely deception, because there were hints over the phone that my connection was not asking for a social call, so I overtly asked if he was trying to sell me something, and he denied it.

    This is during the COVID-19 pandemic, so it was over a Zoom call I was expecting to be a lunch over video chat, and he brought a colleague with him. I say colleague, but I suspect she was actually evaluating him, so I didn’t want to end the presentation and potentially embarrass him. I called him him afterwards, told him I felt I was lied to, and requested he never call me about this again.

    I have more empathy for him now that I know this is a common practice for people to make sales. But to other readers- please, be upfront about why you want to meet…

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