What to look for when choosing a life insurance provider
Understanding life insurance can be tricky. Selecting a provider doesn't have to be. Here are things to look for when choosing a life insurance provider.
Video Transcript: What to Look for When Choosing a Life Insurance Provider
- Video duration: 1 minute 56 seconds
- Transcript date: June 5, 2023
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You've decided you want to get life insurance. You'd like to secure your financial future and protect your loved ones after your death.
But finding a policy that fits your needs can be overwhelming. With so much information out there, it can be difficult to decide what type of policy to choose or how much coverage you should get.
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Here are 3 key factors to keep in mind as you shop for life insurance.
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- Compare insurance providers.
Getting life insurance is a long-term commitment. So, you want to make sure the company you choose will be around for a long time. Start by comparing insurers based on how financially strong they are. Groups like A.M. Best, Moody's Investors Service and S&P Global Ratings can help you get a feel for how well the company is performing.
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- Compare the products.
Life insurance companies offer different products and services. When you consider things like death benefits or the premiums you'll pay, be sure to compare apples to apples. For instance, it wouldn't help if you compared a term life insurance policy from Company A with a permanent one from Company B. Also, when you weigh the same type of policy, pay close attention to details, such as the length of the term, fees and whether you'll need a medical exam. These factors can affect how much you'll pay.
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- Compare the service.
Because life insurance policies are a long-term commitment, you want to make sure the company you choose has a solid reputation. Companies like J.D. Power rate life insurance companies based on customer satisfaction.
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You also want to consider the other products an insurance provider offers. You may be able to get a discount based on bundling other types of insurance like auto or homeowners.
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It can take a bit of effort to narrow down your choices. But once you find an insurance provider you feel comfortable with, you'll have peace of mind knowing your loved ones will be taken care of.
Description of visual information: [Visit usaa.com/advice to learn more.
This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional. NC] End of description.
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You've decided you want to buy life insurance. Maybe you want to replace your income so your dependents will have the money they need to cover important expenses in the event of your death. Maybe you want to create an inheritance for your loved ones. Or maybe you want to leave a legacy through a charitable contribution.
These are just a few of the reasons people buy life insurance, according to the data-driven Insurance Information Institute.See note1 Given that life insurance is a long-term commitment, you want to make sure the company you choose is going to be around for your lifetime.
How do you know what to look for? Consider much more than cost — a little homework can go a long way to creating financial security.
Key takeaways:
- Choose a life insurance company that is financially sound, based on ratings from sources such as A.M. Best, Moody's Investors Service and S&P Global Ratings.
- Understand your life insurance needs and the product that best meets those needs.
- Make an apples-to-apples comparison of premium payments, death benefits, riders, fees and exclusions that the insurer offers.
- Emphasize financial strength, reputation and customer satisfaction.
How to shop for life insurance
When you're ready to buy life insurance, you'll find that shopping is easier than ever. Long gone are the days where you have several sales presentations with a life insurance agent at your dining room table.
But just because it's easy doesn't mean it's not complicated. With just a few taps on your cell phone, you can find tons of options. The hard part is cutting through the smoke.
Read on for tips on how to narrow your options and find the best life insurance companies.
Compare insurers.
The financial strength of a life insurance provider is one of the most important factors to consider. Three major rating agencies rate providers from A to D: A.M. Best,See note1 Moody's Investors ServiceSee note1 and S&P Global Ratings.See note1 They enhance these ratings with a ++ (double plus), + (plus) or - (minus) to indicate whether the credit quality is near the top or bottom of a category. Rating agencies include several factors in their analysis, such as balance sheet strength, operating performance, business profile and enterprise risk management.
That's not to say that rating agency scores are the end-all-be-all, but they create some consistency and simplify what could be a cumbersome analysis.
Compare the product.
Life insurance companies offer different life insurance products and services. When you compare, be sure you're comparing apples to apples.
Why does that matter? You wouldn't get accurate information if you were to compare term life and permanent life insurance policies. You must make sure you're comparing the same type of life insurance.
Even when you're comparing the same type and amount, you want to be sure details like term duration are the same. Here's an example: Let's say you want to compare Company A's level term with Company B's level term. First, be sure you're comparing two 20-year terms or two 30-year terms, for example. Otherwise, it would not be a true premium comparison.
Products can also offer different riders, exclusions and fees. Additionally, they can have different stipulations in the contracts for what happens when the term guaranteed period ends.
When you're comparing permanent life insurance, specifically, additional considerations apply. You want to look at cash value growth rates, dividend schedules, loan terms, fees, etc.
Finally, policies have unique requirements for qualification and underwriting. For example, some require a medical exam and others don't. This can affect pricing.
Compare the service.
When you choose a life insurance provider, you're embarking on a long-term commitment.
In addition to strong customer service, consider the following:
- Does the company offer a discount for bundling other types of insurance, such as auto or home?
- Do you want personalized experience from an individual agent or broker? If so, how long will your agent be around?
- How are beneficiaries taken care of with survivorship services?
Companies like J.D. Power or organizations like the National Association of Insurance Commissioners (NAIC) conduct customer satisfaction surveys and rate life insurance companies. Like the rating companies we reviewed earlier in the article, these companies aren't loyal to one particular insurer and provide valuable feedback for consumers.
Life insurance is a key component of your financial security. If you find a provider you feel comfortable with, you'll be able to meet your dependents' needs in the future and ensure your own peace of mind right now. Before you make a decision, be sure to compare three factors: life insurance providers, their products and the service you'll receive.