Selecting which life insurance company out of a pool of over 1,600 companies can be an overwhelming task. However, with the assistance of some common-sense guidelines this process can become more manageable.
Determine Your Insurance Needs
The first step is to determine your insurance needs:
– Are you looking for short-term or long-term coverage?
– How much coverage do you want to purchase?
– How much of a commitment do you want to make?
Having a basic understanding of your life insurance needs is a simple, effective way of narrowing down the pool of potential insurance companies and policies.
Evaluate Different Companies
Once your insurance needs have been established, the next step is to evaluate life insurance companies from a financial perspective.
If you think you might need your insurance coverage for more than 10 or 15 years, it is imperative that you choose your insurance company carefully while also monitoring companies on a regular basis.
Monitoring your insurer can save you the time and expense of watching your insurer struggle through receivership and sale. The more research you do on your company, the more likely you’re to choose the safest and best insurer for you.
For example, in 1997 an Oklahoma based life insurance company, Mid-Continent Life, was taken over by the state’s insurance department. This left the fate of their 130,000 policy owners up in the air.
Additionally, the larger your portfolio you invest, the more risk you take on. For this, we suggest seeking help from an insurance analysis or independent consultant.
For those “net savvy” consumers who are pros at searching and analyzing financial data, we suggest using the Internet to your advantage.
Now, most life insurance companies present their information and ratings online. Generally, these reviews are free and public information.
It’s easy to simply compare two companies and choose the better one. However, we advise against this. Instead, hold each company up to a pre-determined set of benchmarks.
If an insurance agency wants to sell a particular company or policy, it is not uncommon for the agent to offer two or three alternatives that look worse than the one the agents want to sell.
Does it Cost More to Purchase Insurance From a Top-Rated Company?
Finally, don’t assume that it costs more to purchase insurance from a top-rated company.
Since insurance companies generally have comparable expenses, reserve requirements, and overall investment strategies, buying from the best does not necessarily result in higher premiums.
Also, policy illustrations are poor indicators of how a policy will perform.
Now you know how to select a company, but how much life insurance do you actually need? Read our article on How Much Life Insurance Do I Need?
Steuer, author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, has more than 25 years of experience and holds the Department of Insurance Analyst License (LA) as well as the Charted Life Underwriter (CLU) designation. Tony holds various leadership positions and has authored three books on the topic of life insurance.
Steuer’s work has been awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy for his The Questions and Answers on Disability Insurance Workbook and The Questions and Answers on Insurance Planner. Forbes named Questions and Answers on Life Insurance: The Life Insurance Toolbook as one of their top nine great investment books.
He’s also the founder of the Insurance Literacy Institute and creator of The Insurance Bill of Rights designed to empower consumers and to identify members of the Insurance Industry dedicated to strong professional standards.