The Insurance Information Institute (III) reports that there are more than 1,000 life insurance companies in the United States--so how do you pick the right one?
Let's examine some of the main factors to consider when buying life insurance to try and winnow out the company that's best for you.
Choose a Company That's Licensed in Your State
Purchasing life insurance from a company licensed in your state has many benefits. For example, if a significant problem arises that you can are unable to settle with your insurer, you can access your state's insurance commissioner for remediation. Another reason to choose an insurer licensed in your state: should the company go bust, your state's life insurance guaranty fund only helps policyholders of state-licensed companies.
You should also check with your state insurance office to see if there have been a spate of consumer complaints against the companies you are considering.
Financial Solvency
Buying life insurance is a long-term financial commitment--for you and the insurance company. When selecting an insurer you should choose a company that's been in business for a while, and that is likely to be financially sound in the future.
There is no federal guarantee for insurance, as there is for banks and credit unions. Fortunately, there are four organizations that provide ratings on the financial health of major insurance companies:
Life Insurance Premiums
Not all insurance policies are underwritten equally. Premiums for different types of life insurance vary greatly, so it's best to get life insurance quotes from at least five agents or companies.
When gathering quotes and making life insurance comparisons, be sure that you are comparing apples to apples--coverage amounts and term limits should be the same for each quote. You should also examine the insurance coverage for features that may cost big bucks down the road. Some life insurance policies offer a guaranteed renewable feature, while other policies may require you to pass a medical exam to renew your term life insurance policy.
Cost Indexes
When making life insurance comparisons, ask your agent about the net payment cost index and the surrender cost index. If you are considering a term policy, insurance coverage for a specific period of time, use the surrender cost index. If you are considering a whole life policy, life insurance meant to be held indefinitely, use the net payment cost index. According to the III, a lower cost index is usually a better option.
Service and Claims
If you need advice, want help filing a claim, or want to make changes to your life insurance policy, you want your questions and needs addressed in a timely and efficient manner. Make sure your life insurance agent is someone with whom you feel comfortable and confident.
Just like any business decision, it pays to do your due diligence when gathering life insurance quotes. You should research and carefully consider the benefits of different life insurance companies. As a result of your investigation, you should get accurate life insurance quotes from reputable companies that may serve your life insurance needs.
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