When searching for a life insurance policy, many people look strictly at the cost of the policy rather than looking at the carrier as well. The carrier of the policy is important because a strong financial foundation is necessary for a carrier to provide sound policies. It is also important to look at how highly rated the carrier is among other financial institutions, and review what guarantees are provided around paying out death benefits. Different life insurance carriers are also going to offer a range of services and features that should be closely reviewed.
When you start looking at different life insurance companies, it is good to know how the various rating systems work. This will save you some time sifting through information, and give you some key things to watch for. The Better Business Bureau ratings are a standard one that you can find information on. The one thing with these ratings to keep in mind is that these are customer satisfaction ratings, so you can get some that go to extremes on both ends of the spectrum. For the BBB ratings, you are looking for something that is an A+ or A.
J.D. Power is another rating system that is fairly universally used. Most of the largest insurance companies will be put through this rating system and get a score of 1 – 1000. The criteria for these ratings are also customer service based so higher scores indicate better customer satisfaction, but they don’t necessarily get to the heart of financial stability. When looking at the JD Power rankings, you want to stick with companies that are 725 and above.
A third rating system to be aware of is the A.M. Best financial health report card. This score will really give you a good look at the overall financial stability of the company which is essential to providing a high quality life insurance plan. The report card scores start at A++ and A+ being the top ratings followed by A.
When looking at the ratings for different health insurance companies, it would be ideal to find one that has a positive BBB rating, a higher J.D. Power rating, and an A.M. Best rating of A+ or better. Using this criteria, it can really help you to narrow down your list of possible companies to work with.
Term Life Policies
A term life policy has a specific date that it expires on. This is the most common type of plan for people to purchase because it is typically more affordable. These policies are also very simple to understand and that is appealing to many people as well. There are three main aspects that you need to take into consideration when shopping for a term life plan: age, health and hobbies.
The overall cost of a policy is going to be based on how much risk is involved to insure you. Your age, health and hobbies all help insurance companies define that risk. Diabetes, smoking or having a family history of cancer are all examples of health issues that can affect your overall risk. Having dangerous hobbies can also increase your risk, as can your age.
Insurance companies will do some sort of screener to determine some of these risk factors, and then you need to pay attention to the coverage amounts and the term of the policy before making a decision. The older you get within the term, the higher the insurance premium will go. A good benchmark to determine the length of your term would be to line it up with when your mortgage will be paid off as that is typically the single largest contributor to your debt.
Whole Life Policies
While term life policies might be less expensive, they don’t hold any value once they expire. A whole life policy, on the other hand, does not have an expiration date, and it holds some cash value over time. It is typical for this type of policy to be eight times more expensive than a term life policy.
One of the most important factors to consider when buying this type of policy is the financial health of the carrier. A whole life policy could be in your possession for decades, so you need to feel confident that the company will still be around in the future. The whole life policies typically have a guaranteed interest rate of return each year, so it is good to monitor that. The whole life policy builds value over time, so when you get to a point where you feel you don’t need it anymore, you can cash the policy out and have that money to use for retirement, college tuition or any other project you might need funding for.
When you are searching for your life insurance policy, take your time and do the research necessary to make a wise choice. Look at the various ratings, determine if a term or whole life policy is the best option, and then consider the overall cost of the policy and the track record of the company before making a purchase.