Researching and Deciding on a Life Insurance Company
Many people choose their insurance company simply based on the price of their life insurance quotes. While the price being competitive is certainly important, there are a number of other factors to consider when making this important decision. Below are the key points to keep in mind:
*Financial Solidity - This is arguably the most critical factor in selecting a life insurance provider. Regardless of how good a company's product is, you need to be assured that the company is financially secure enough to pay your claim. There is not a guarantee for life insurance policyholders similar to that provided for bank accounts by the Federal Deposit Insurance Corporation (FDIC). Therefore, select a company that has been financially sound for many years, by checking the ratings from independent agencies.
*Customer Service - For most people life insurance can be a complicated subject. It helps to deal with an agent or representative that you can trust, who listens and is attentive to your needs.
*Claims and Market Ethics - Your state insurance department can tell you if the company you are considering has had a high ratio of consumer complaints.
Also, it makes sense to do business with a company that has high ethical standards. Some life insurance companies adhere to the codes of conduct of the Insurance Marketplace Standards Association, a nonprofit organization that promotes ethical behavior in life insurance marketing.
The higher a company's rating in these two vital areas, the higher your chances of being treated fairly and respectfully.
*Premium and Cost -
The premium is the amount you pay for the life insurance policy. Even for a given death benefit and type of insurance, the premium can vary widely among companies. This is because some companies' policies have features that others do not or simply because some charge more than others for the same coverage. Therefore, the first step in comparing policies is to make sure you compare similar insurance plans, based on the following factors:
Age
Type of policy and features
Amount of insurance you are buying
Keep in mind that the premium for the policy is not the same as the cost of the protection portion of the policy. One policy might have a higher premium but also offer more benefits than another. It is certainly possible that the higher-premium policy might have a lower cost of protection.
How can you tell what a policy's cost is? Companies should tell you a policy's Net Payment Cost Index and its Surrender Cost Index. Use the Surrender Cost Index if you are thinking of keeping the insurance only for a specific period of time. Use the Net Payment Cost Index if you expect to keep the policy indefinitely. Generally, the lower the cost index, the better value you are receiving.
Lastly, but importantly, always keep this in mind when selecting a life insurance company:
*Licensing - Not every group of insurance companies are licensed to operate in each state. As a general rule, you should buy from a company licensed in your state. Then you can rely on your state insurance department to help if there is a problem. If the insurance company dissolves, your state's life insurance guaranty fund will help only policyholders of companies it has licensed. To find out which companies are licensed in any state, contact that state's insurance department.