7 Factors to Consider When Choosing a Life Insurance Provider

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Before choosing a life insurance provider, it’s important to realize their importance to your financial stability. Unfortunately, many consumers who need it the most have yet to get that message.

A recent study from LIMRA found that low and middle-class earners had no life insurance at all and very little in savings to handle debts and expenses should the primary wage-earner die.

Whether underinsured or not insured at all, it’s vital to understand how important insurance is to your financial future. Once you do, look to a provider who can set you up with the best products. For that, you’ll want to focus on seven key areas.

1. Insurance Type

The cost of insurance will greatly depend on the type of insurance that you purchase. A whole life policy that builds cash value will present more hurdles to acquire than will a term life.

Understanding these two primary types of life insurance will help you understand why that is. Term life policies offer no additional benefits beyond the death benefit. In other words, the insured has to die for the beneficiaries to take advantage.

The “term” in term life is also good for only a certain period of time. Say you purchase a 20-year term-life policy. That means your death will be covered in the insured amount for that full 20-year period. 

After that period expires, however, the policy pays nothing. If you’re still wondering, “how are they different?“, you must understand how a whole life policy functions in contrast. 

Whole life policies can build cash value. That means a little bit of each premium can be withdrawn or borrowed against at a reasonably low interest rate. Essentially, you get more benefits from them than you do a term-life policy, and they don’t require a death to take advantage.

2. Personal Health

Another factor to consider when choosing a life insurance provider is your personal health. To understand why that is, we must go back to the type of insurance you’re looking at purchasing.

Buying into a whole-life policy after the age of 30 gets pricier. Naturally, that’s because we’re at risk of more health issues the older that we get. That’s why you see many buying term-life policies as they get older.

Deciding to buy a term-life policy channels you toward a different type of insurance provider. Many of the mainstream insurers will work with third-party companies to offer term-life options. You also might consider buying directly from a term-life insurance company.

That said, take stock of where you are health-wise as you weigh your options. Check with more than one provider to see the best deal if you’re still in optimum health. Also, consider the hurdles you’ll need to jump through to buy or add coverage to a whole-life policy.

3. Actual Needs

Why are there so many different insurance plans? Quite frankly, it’s because not everyone’s insurance needs are the same. For example, take a family of four where the primary wage-earner is too old to get a whole-life policy that would leave enough for the family in event of his or her untimely death.

In this scenario, a person with a $125,000 whole-life policy isn’t going to have nearly enough coverage for full income replacement, particularly if they have 15-20 years of earning power left.

Buying a term-life insurance policy can be an attractive option in this scenario. That’s because it allows one to buy hundreds of thousands or even millions in coverage at a price they can afford.

If the policy expires after their retirement, then their needs have been met. That is, the purpose of the policy, to protect the family in the event of an unexpected death, has been fulfilled.

The lesson here is clear. Ask yourself how much insurance you truly need before making a purchase. Then, shop around among the different life insurance providers to see who offers the best terms and service.

4. Pricing

Life insurance benefits beyond the death benefit will cost extra. That’s why whole-life policies are historically harder to buy and modify past a certain age.

Whatever you decide to buy, however, should be well-researched. That means getting quotes, comparing them, seeing which providers allow deeper discounts when bundling with other policies. 

Pricing isn’t everything when buying life insurance. You should seek the best possible deal for your pocketbook, though, and you’re not going to get that just shopping in one place.

5. Formal and Informal Ratings

There are many organizations that can help lend credibility to the life insurance provider that you end up choosing. The Better Business Bureau, A.M. Best, Standard & Poor’s, and Moody’s, are among the several watchdogs out there with the best reputations.

Also, don’t discount the customer experience or the referral of friends. Everyone’s situation is different, and that will affect available pricing and services, but it pays to know what others’ experiences have been. Therefore, read as many references and reviews as you can about a company before proceeding. 

6. Benefits Offered

We’ve already mentioned bundling as a great way of getting the best possible price on life insurance with additional benefits. Each company handles this concept differently (i.e., bundling different products, offering discounts or coverages that others don’t). 

That’s why you don’t just look at price when shopping for a life insurance provider. Look also at what they’re offering you. Read the fine print, and make sure any providers you’re comparing are quoting rates on the same scope of services.

7. Reputation

Many insurance companies have operated for decades. Longevity isn’t necessarily a sign of the best, but it is enough of a component to show the kind of reputation the business has acquired. 

Read financials for those companies where it is available. See how well-funded and dependable the company is. Pay close attention to any financial woes they might be having. 

Follow the Checklist to Choose the Right Life Insurance Provider

Life insurance isn’t the most comfortable of topics to talk about. However, it’s something you can’t afford to live without. 

We hope these insights will connect you with the life insurance provider that’s right for your family’s needs. Best of luck in your search. For more helpful business and financial tips and information, check out some of our additional posts!

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