Choosing a life insurance company is not a simple task, but several important things are worth considering to make the process a lot easier.
There are a wide variety of reasons why you should think about purchasing a life insurance policy. Anyone with a desire to provide financial assistance for their family or a charity should think about buying life insurance. The same can be said if you are involved in a business partnership or if you want to pay off estate taxes. Important events in your life—like getting married or starting a family or business—are times to consider buying life insurance or even to reevaluate a life insurance policy you already have.
With so many different life insurance companies to choose from, both large and small, it can be confusing—and overwhelming.
Here are three important things for you to consider when choosing the best life insurance company.
1. Third Party Ratings
One way to quickly evaluate an insurance company’s rating is to access their Comdex score, which is the average ranking a company receives from the four aforementioned major rating agencies in America. The Comdex score is not a rating in itself, but rather a number from one to 100 that can be used to quickly compare the ratings a company has received from the top four rating agencies. The company needs to have been rated by at least two of these agencies to receive a Comdex score.
Comdex ranks the companies in relation to other companies that have been rated by the rating services. The closer an insurance company’s score is to 100, the more desirable they typically are to the consumer.
View The Full Comdex Report.
It’s important to remember, however, that a company’s rating is not the only factor to look at when considering a life insurance purchase. If you’re evaluating two different companies and one has an A-rating and the other an AAA-rating, don’t simply assume you should buy a policy from the higher-rated company. The company with the A-rating might have a policy with more of the features you’re looking for.
Additionally, because agencies can announce a rating change on any given day, it’s recommended that you periodically check the ratings of any company you have an interest in—especially if you already have a policy with that company.
2. Paying Ability
Before choosing a life insurance company, make sure you understand what the company’s reserves are.
An insurance company will set aside a specific amount of money from every premium dollar as a reserve. The company must balance their cash reserves with investment income from premiums to pay claims and still make a profit. If the company loses too much money through investment activities or claims made, the reserves are there to protect them so they can pay their debts. These reserve requirements are typically written into law with the intent of protecting the consumer. The exact reserve requirements, however, vary according to the state you live in, but they are generally between 10 and 12 percent of revenue.
Minimum reserve requirements are mandated by each state, but the insurance company may hold more money in reserve than the state minimum. Typically, the more money an insurance company has in reserve, the more protection they have during difficult economic times.
Of course, learning that your life insurance company is in financial trouble can be a frightening bit of information, but policyholders should take comfort in knowing that state guaranty associations are in place to provide you with protection and continuing coverage. State guaranty funds will pay claims up to a certain limit if your insurance company goes under. The guaranty system safety net helps keep the promises of the insurance industry, even when companies fail.
The National Organization of Life & Health Insurance Guaranty Associations, or NOLHGA, was created in 1983, and since that time state guaranty associations have:
- Provided protection to more than 2.5 million policyholders;
- Guaranteed more than $22 billion in coverage benefits;
- Contributed approximately $6.2 billion toward the fulfillment of insurer promises.
Coverage is coordinated on a state-by-state basis, so you can check NOLHGA’s website to find your state’s association.
3. Conversion Options and Privileges
You should learn as much as you can about the company’s conversion options and privileges for term life insurance. Most of the life insurance policies that are sold are term policies, providing coverage at a fixed rate for a set amount of time—hence the name term.
With standard term life insurance, if the policyholder outlives a 20-year term—or the life of that policy—the contract runs out and the insurance company simply keeps the premiums paid.
Term life insurance is a safeguard against the unexpected. It’s a great option for young families, but it’s built primarily as temporary insurance. It’s a fraction of the cost of a more permanent option—like variable life, whole life, or universal life—but it’s typically not intended to pay out like a long-term policy.
That’s where a conversion feature becomes an attractive option.
Some term life insurance policies have a conversion feature that lets you change your term policy to a permanent policy, like a variable, whole, or universal life. These types of policies are set for the entire lifetime of the policyholder and provide guaranteed premiums and cash values that grow from one year to the next.
Having a conversion feature as part of your life insurance policy is important because it allows you to change your policy without having to take a medical exam or to re-qualify.
True Blue Life Insurance Assurance
At True Blue Life Insurance, we only quote A-rated companies, so you can rest assured that you will be purchasing a life insurance policy from not only a reputable company, but also a company with a history of stability.
Nevertheless, determining how much and what kind of insurance to buy is one of the most important financial decisions you’ll ever make. It’s also one of the most complicated. A qualified True Blue insurance professional will conduct a thorough analysis of your insurance needs and provide you with policy recommendations that are based not only on our public knowledge of company ratings but on our own personal dealings with the companies we recommend.
We are knowledgeable about the different products that are available from a wide variety of insurance providers, and we can help you determine what type of coverage you need for your unique situation.
We look forward to helping you with all your life insurance needs. Contact True Blue Life Insurance at 1-866-816-2100.