The process of selecting of a life insurance company can be overwhelming. To help, here are some tips for the selecting the right life insurance company for you.
There are roughly 1,000 life insurance companies in the United States, and many are members of groups of companies.
Having separate companies enables a group to offer its products through separate distributions channels to more efficiently meet the regulatory requirements of particular states, or to achieve other organizational goals.
There are an estimated 300 company groups, but not every group has a company licensed to operate in each state.
As a rule of thumb, you should buy from a company licensed in your state so you can rely on your state insurance department to help if there’s problem. To find out which companies are licensed in any state, visit the website of the National Association of Insurance Commissioners (NAIC).
In addition, the Insurance Information Institute recommends the following factors when selecting a life insurance company:
Product
Most companies offer a broad range of policies and services, so choose a company that satisfies all of your insurance needs.
Identity
Life insurance company names can be confusing, and different companies can have similar names. Most companies use specific words that convey a certain type of emotion. Below of are some word choice examples that an insurance company may use:
- Financial Strength (i.e. Guaranty or Security)
- Financial Sophistication (i.e. Bankers or Financial)
- Maturity (i.e. First or Pioneer)
- Dependability (i.e. Assurance or Trust)
- Fairness (i.e. Beneficial or Peoples)
- Breath of Operations (i.e. National or International)
- Government (i.e. American or Republic)
- Well-Known and Respected (i.e. Lincoln or Franklin)
Be sure you know the full name, home office location, and affiliation (if any) of any company you are considering.
Financial Solidity
Because life insurance is a long-term arrangement, ensuring the financial strength of your insurance company prior to purchasing a policy is vital. To help you judge the financial strength of life insurance companies, there are four independent agencies – A.M. Best, Fitch, Moody’s and Standard & Poor’s. Each of these agencies rate the financial strength of insurance companies. More information about these agencies can be found here.
Advice and Service
For some, the process of life insurance is strange and complicated, so the assistance of life insurance representatives is beneficial.
Claims
You can use a national claims database to see what complaint information it has on a company. Your state insurance department will be able to tell you if the insurance company you are considering had many consumer complaints about its service relative to the number of policies it sold.
Premium and Cost
The premium is the amount you pay the company for life insurance, which can vary among life insurance companies. This is because some companies’ policies have features that others do not or because some charge more than others for the same coverage.
When comparing policies, it is imperative that you compare similar insurance plans, based on:
- your age
- type of policy and policy features
- amount of insurance
However, the premium for the policy is not the same as the cost of the protection portion of the policy. One policy might have a higher premium but also offer more benefits than another.
Comparing life insurance policies can be overwhelming, so it is also best to seek out assistance from a licensed life insurance agent.