Shopping for Life Insurance
Premiums are obviously a very important factor in shopping for life insurance. But there are other critically important factors that you cannot overlook, not only criteria in the insurance policy itself but also in the financial strength and customer service in the insurance company.
Where to shop for life insurance
If you have an insurance broker for your other needs, while means give them a call and see what they can do for you on life insurance. But do not then go to their office and sign the papers. It is imperative that you compare the rates for many insurance companies. The best way to do this is to go to a reputable insurance comparison website. Three good sites we recommend our AccuQuote.com, Insure.com or QuickQuote.com. There are other sites as well, but make sure that they are not just a front for pushing a particular company they are getting a kickback from; seek out consumer advocacy groups on the Internet and see which sites they recommend.
Of course, you have to compare apples with apples so you must first know what type of insurance policy you want. Figure this out before you start comparison-shopping. There is no way you can compare the term life insurance policy to a whole life insurance policy, and even just among whole life, that you can compare traditional, universal, and variable whole life policies.
These comparison shopping websites will ask you for information about yourself such as your age and your health, and present a wealth of information on how much insurance you can buy for various terms, and the premiums will have to pay.
Life insurance company ratings
Not all life insurance companies are equal. It is a big deal to make sure that you select a life insurance company that is financially strong. Life insurance companies do on occasion, and especially during financial crises, go out of business. Remember AIG? Everyone thought they were “too big to fail.”
Every state has something called state guarantee funds that will come to the rescue and pay the claims of insolvent insurers, but there are limits to the amount of that guarantee. And with a near insolvency of our state governments, it may be a more important criterion to rely on the strength of the insurance company.
The way you check on the strength of insurance companies to check their financial integrity that is rated by the five major rating agencies: A. M. Best, Fitch, Moody’s, S&P, and Weiss. Each company may use different methods of rating, but in general the best is AAA and the lowest C, D or F. There is no need to stray from AAA rated companies. And make sure that you do check the ratings from more than one rating agency to make sure that you have not looked at a rating aberration.
Guaranteed renewability, sometimes called guaranteed insurability, dictates that the insurer is required to renew the policy for a specified amount of time regardless to the health of the insured. With healthcare costs rising rapidly, due to medical costs, legal costs, and government regulation, insurance companies in order to maintain viability will be looking to avoid paying out as much as possible. You need to see this guaranteed renewability clause in your policy.
Now you have a responsibility to maintain your end of the agreement by making your premium payments on time and to have been truthful in your insurance application. If you don’t, the insurance company will have a legal right to raise your premiums at will.
Buying the policy
Once you find an insurance company you may be able to purchase the policy on the Internet, by telephone, or otherwise directly without the use of an insurance agent. But many companies require you to go through an agent, which sometimes adds to the cost of your policy. So, since you’re paying for it, make sure you get an agent that has a record of trustworthiness, and is one you personally like. Almost anyone can sell insurance, so his or her knowledge and skills can vary greatly.
And if you end up in the office of insurance agent, be wary of them trying to talk you out of the decision you have made with all the research and comparison shopping you have done (hopefully) on your own. As with any salesperson, it is rare to find one that will not try to up sell you. Just as you should use an accountant who is a CPA, it is wise to use an insurance agent who is a Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), or a Certified Financial Planner (CFP),
This article has just touched the surface of some basic and common sense information that you need to buy the best insurance policy you can, affordably. We recommend term life insurance, towards simplicity and pure insurance approach, but if you have if you have to buy whole life, either due to your age or other financial planning needs, the comparison shopping becomes much more complex. Not only do you need to evaluate everything we have talked about, but all the various complex issues involved in whole life, not the least of which is determining if the insurance company can effectively manage and grow your investment.
Keep focus on your basic needs, and that is to find a rock solid company who will pay sufficient amount of money to your beneficiary for premium or you can afford. Don’t let all the exotic add-ons and high-pressure sales people talk you into more than you really need. Use your common sense.