Buying insurance doesn't have to be difficult or expensive. Direct purchase insurance (DPI) policies provide simple, affordable coverage options directly from insurance carriers without agents or intermediaries. This guide will walk you through everything you need to know about DPI—from understanding what it is and your coverage options, to finding the right policy for your needs in just a few easy steps.
What is Direct Purchase Insurance?
Direct purchase insurance (DPI) refers to insurance products that are purchased directly from the insurer without an agent or broker. In traditional insurance models, policies are sold through agents who receive commissions from carriers. With DPI, the insurer is cutting out the middleman to offer more affordable premiums.
DPI is a simpler process compared to using an agent or broker. Policies have clear terms and pricing upfront since commissions do not factor into premium costs. Coverage amounts and terms are standardized across policies to streamline the purchasing process.[1] DPI has become an increasingly popular option for straightforward term life, disability, and critical illness insurance needs.
Key Features of DPI
Lower Premiums: Since carriers do not pay agent commissions, the cost savings are passed on to consumers in the form of lower premiums.
Online Application: Most DPI policies can be purchased entirely online or over the phone without paperwork.
Self-Service Model: Consumers have the flexibility to research, apply, and manage their coverage independently without relying on an intermediary.
Standard Policies: Product options tend to be simpler offerings with consistent contractual language and benefits.
While DPI cuts out intermediary commissions, buyers forego the personalized advice an agent can provide. DPI is best suited for individuals who are comfortable assessing their needs and comparing policies independently.
Types of Direct Purchase Insurance
Several common insurance types are available through direct purchase models. Knowing your coverage needs will help narrow down the best options:
Term Life Insurance
Term life policies provide death benefit protection for a specified period, usually 10-30 years. Term is the most affordable permanent life insurance option. DPI term policies are basic offerings with standard coverage amounts.[2]
Whole Life Insurance
Whole (permanent) life combines a death benefit with a savings component you can access through policy loans or withdrawals. Premiums are higher than term but remain level for life. DPI whole life products have less living benefit riders than brokerage policies.
Critical Illness Insurance
Critical illness (CI) coverage pays a lump sum if diagnosed with serious medical conditions like cancer, heart attack, or stroke. Like term life, CI premiums are lower through DPI. Coverage periods tend to be 5-10 years.
Disability Income Insurance
Disability income (DI) replaces a portion of your earnings if you're unable to work due to illness or injury. Options include short-term and long-term policies. DPI DI is best suited for basic monthly benefit needs.
Carefully assessing your situation will help determine which type aligns best with your budget and objectives. Term is a good entry-level option, while other products add cost but provide more customized benefits.
Purchasing Direct Purchase Insurance
Procuring DPI is simpler than using an agent or broker, but still requires some preparation to find the right coverage at the best price. Here are the typical steps:
1. Gather Information
Before shopping, determine your insurance needs, including policy terms, riders, and desired death benefit or income replacement amounts. Have information like your age, health/medical history, occupation, income, and existing coverage ready.
2. Research Carriers and Plans
Use carrier websites and third-party comparison tools like CompareFirst to explore available DPI options from top insurers. Filter products by your criteria to identify those worth further evaluation. Review costs, benefits, exclusions, and contract terms.
3. Get Quotes
Request quotes from multiple carriers by completing quick online forms. Be ready to provide medical and financial information for underwriting. Some carriers may request medical exams for larger coverage amounts.
4. Compare and Select a Policy
Evaluate quotes side-by-side based on long-term costs and coverage features important to your needs. Consider factors like reputation, financial strength, and customer service records for shortlisted carriers. Choose the best overall value.
5. Complete the Application
Complete the online or paper application with utmost accuracy as false information could impact approval or claims. Provide consent to process your application and authorize necessary checks.
6. Receive Coverage Documents
If approved, the carrier will mail your policy and fulfillment package for records. Review all documents carefully to confirm your coverage is correct. Mark your calendar for future premium due dates.
With prudent planning and research, the DPI application process takes just a few hours to complete independently without an intermediary. Getting multiple quotes is key to securing the most competitive rates.
Benefits of Direct Purchase Insurance
Consumers opt for DPI for cost savings and convenience, though limitations apply compared to mediated policies. Here are some key pros:
Lower Premiums: Removing commissions from the pricing structure makes DPI on average 20-40% cheaper than equivalent brokered policies.[3]
Simplicity: Purchasing is straightforward with clear applications, terms, and standardized products needing little guidance.
Self-Service Model: Conducting your own research empowers you to customize coverage as desired without relying on an agent or broker.
Straightforward Reimbursements: Claims handling tends to be streamlined and efficient with no middle parties involved.
Budget-Friendly Options: DPI opens the door to more affordable coverage for families on modest incomes. Prepaid policies are also available.
However, some trade-offs occur without advice from an insurance professional:
Limited Customization: Products and features may not align perfectly with your individual situation.
Unsupported Research: Buyers miss out on an agent's expertise in assessing complex health, income protection needs.
Harder to Navigate: Inexperienced consumers can miss better alternatives or make uninformed choices without guidance.
For most basic term life, disability, CI policies under $500,000, DPI strikes a great balance of low costs versus needs. But expert guidance is prudent for more complex situations or larger coverage amounts.
Comparing Direct Purchase Insurance Products
Comparison shopping across top carriers helps ensure you're getting the best policy match and value in your DPI purchase. Look closely at core factors:
Premium Costs
Rates depend on your age, health, carrier's underwriting, and policy features like the death benefit or benefit amounts. Shop multiples quotes for costs over the lifetime of coverage.
Coverage Period
Term lengths can range from 10-30 years for products like term life. Ensure the duration aligns with your objectives.
Benefit Amounts
Life insurance should sufficiently protect your family from financial strain. Income protection should provide enough for basic living costs.
Exclusions and Limitations
Pay close attention to non-covered conditions, pre-existing ailment clauses, policy terms, and renewal options.
Optional Benefit Riders
Evaluate supplementary benefits like Critical Illness, Accidental Death, Waiver of Premium riders offered and their additional premium impact.
Customer Service Records
Carrier reputation, complaint volumes, and history addressing issues matter during claims. BBB, AM Best, and J.D. Power ratings help assess this.
Armed with insights, you're ready to efficiently compare top DPI players like Ethos, Bestow, Haven Life, or Ladder using online tools. Work through hypothetical scenarios to identify the most comprehensive coverage match at lowest long-term costs for your situation. With diligent research, DPI offers excellent value for simple protection needs.