How To Choose A Life Insurance Company

Insurance Agent ConsultationA life insurance company is one of the most important decisions you’ll make but how do you find one that provides the best policy options?

There is a wide range of choices out there from large, mainstream providers to small, more focused businesses. It’s up to you to filter through and find one that fits your needs.

Here we’ll discuss what to look for in a life insurance company.

Selecting a Life Insurance Company

Choose a Life Insurance Agent

The right agent is the key to finding a life insurance company because these professionals are trained to evaluate your situation and make recommendations.

Insurance agents fall into one of two categories:

  • Associated or Captive
  • Independent

Associated or Captive Life Insurance Agent

The associated agent works for one specific insurance provider, so that limits your options, but not in a bad way. Associated agents have a handle on what the company provides, the different policy choices and how they may fit your lifestyle. This first-hand knowledge is valuable.

Independent Life Insurance Agent

The independent insurance agent can walk you through the various providers if you are unfamiliar with the different brands and what they offer. As the name suggests, an independent agent works with a variety of providers to expand your policy options.

Look at Life Insurance Company Credentials

Approach agent shopping like you are hiring someone for a job.

Insurance agents, like most professionals, can align themselves with organizations that improve their credibility such as the National Association of Professional Insurance Agents. Membership in an industry organization shows the agent is up to date on current research and industry trends and that they meet the ethical standards required to join.

Ask to see any credentials they have, like state licensure and training certifications, along with a list of insurance providers they represent.

When it comes to independent agents, the more the merrier. Look for an agency that deals with multiple companies, so they can provide you with a diverse list of providers.

Check Out the Insurance Provider

Once you find a policy that you think is right for you and your family, investigate the provider.

Financial stability is the most important factor because, without it, your policy loses value. You want an insurance company that is going to be around when you need them.

Look at the following:

  • The longevity of the provider — Do they have a well-established brand? Have they been in business for more than just a year or two?
  • Look at the Comdex score — A Comdex score ranks the provider from 1 to 100 based on input from different agencies. Ratings involved in creating the Comdex score include A.M Best, Moody’s Investors Service, Fitch and Standard & Poor’s. The higher the score, the better. Providers with Comdex rating between 85 and 100 are considered solid by industry standards.
  • Check the Better Business Bureau — The Better Business Bureau will give you insight into how the company runs and its customer service practices.
  • Check the State’s Department of Insurance — Look for complaints about the provider.

Even a simple Internet search will tell you about the company’s history of paying claims.

Consider Budget Factors

Life insurance is a long-term investment and premiums will vary from policy to policy and even change over the years.

You want a life insurance provider that has a plan that fits your long-term budgeting goal and is transparent about the key features of each policy like net payment cost index and surrender cost index.

Net Payment Cost Index

Net payment cost index helps you compare future costs over 10 or 20 years if you pay the premiums and do not take the policies cash value.

Ideally, when comparing similar policies, you want a policy with a small cost index because it is the better buy. This tool is really only helpful when you have a short list of possible policies that have the same basic features and you need to pick one to purchase.

Surrender Cost Index

The surrender cost index is the cash value of the policy over the years. If you decide to stop paying the premiums and surrender the policy, so there is no payout upon your death, how much is the cash value?

Consider, as well, the cost of premiums based on your earning capacity over the years. If you have a solid job, you might be able to afford higher premiums with more attractive dividends, cash values, and death benefits.

What is the Conversion Option?

Conversion option refers to the ability to convert a term policy to a whole or universal plan.

Term life insurance policies have fixed rates for a certain period of time or term. Many term policies come with the ability to convert to a plan that lasts the lifetime of the holder with guaranteed premiums and growing cash values at the end of that term.

The conversion feature allows you to change the policy without a medical exam or going through the process of requalifying, too. Since most conversions occur when the policyholder is older, that’s an important benefit.

Deciding On The Best Life Insurance Company For Your Goals

There is no one-size-fits-all plan for choosing a life insurance company.

You are making a significant investment when you purchase a policy, one that will likely follow you for decades, so take the necessary steps to ensure you are working with a life insurance company that meets your needs. It may seem like extra work but it will pay off in the end.

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