Choosing The Right Life Insurance Company

Factors To Consider When Choosing a Life Insurance Company

The decision to get life insurance coverage is not an easy thing to do. Hence, there are many things to consider once you decide to acquire the best plan for your needs. There are several reasons many choose to get a life insurance policy:

1. They want to secure the future of their loved ones in case of their unforeseen demise.
2. It is a good option for business owners to protect the company’s interest in case of their loss.
3. It is essential for people who want to stay away from paying hefty estate taxes. 

Also, starting a new life event such as getting married or having a new business are good considerations to get a policy. In case you already have one, you may want to assess the policy and its coverage. Luckily, there is a myriad of insurance providers to fulfill your needs. However, options are overwhelming, especially for first-timers. 

Read on to determine the three most valuable things that one should consider when choosing a life insurance company. Picking the best life insurance company for your needs is very important.

1. Ratings from Third Parties

The financial stability of the insurer is a crucial factor that one should consider. It will determine if they can give you the coverage you need by the time you pass away. The good thing about the industry is the fact that each company is being rated. Therefore, ratings can aid people in finding out which one has the best financial strength. These independent agencies are:

• AM Best
• Standard & Poor’s
• Fitch Ratings
• Moody’s

Ratings can tell consumers which insurers have the most stable financial condition to uphold their future and ongoing policies ad obligations to their clients. Furthermore, it is base on the provider’s balance sheet, business profile, and overall performance. 

Each of these four agencies has its own set of guidelines and processes. For example, Standard & Poor’s top rating is AAA, while AM Best gives A++ for their top rating. It is good to base your choice on the rating of one of these agencies to secure your family’s future. 

Moreover, the easiest way to check the rating is t view the Comdex Score. It is a list that will show the average of all insurers base on the rank given by these four independent institutions. However, it is not an actual rating, but you will find a number from 1 to 100. Insurance providers need to get a rating from at least the four agencies to be included in the Comdex score. It will give you the ranking of companies. Hence, a better choice should be close to 100. It means that the insurer’s financial strength is stable. 

The rating is not the only thing that you must consider when selecting the best insurance provider. In case you are choosing between two companies: one with A+ while the other with AAA rating, it does not mean that the one with the higher rating is the most ideal for you. The one with an A+ rating must have a well-structured policy that fits your individual need. It is good always to take a look at the feature for each policy the company is offering. 

If you already have a policy on hand, it is good to check the ratings from time to time. Typically, it changes every day, so it is your duty to monitor your insurer’s performance. Also, you may check the credibility of the insurer from the Better Business Bureau or the State Department of Insurance for any claims that are out there against the company.

2. Ability to Pay

One of the most critical parts is to check the company’s reserves. A good insurer will only set a specific amount from every premium as a reserve. However, balance is of the essence between the reserve and the company’s investment to pay for all claims and still gain some profit. In case the company lost a huge amount of money from a failed investment, reserves are there to pay back debts. Reserves requirement is a law that is created to safeguard the interest of consumers. The reserve requirement may vary according to state. However, it usually is between 10 to 12 percent of the total revenue. 

There is a minimum reserve requirement for each state, but some companies can hold more than the minimum amount. It is a good thing because the reserve money means that the company can survive future losses.

It is frightening to know that your insurer is suffering from financial trouble. However, the state has its way of protecting consumers and continue the coverage. The state can guarantee funds to pay all claims up to a specific limit in case the insurer suffers from significant financial loss. It is a guaranty system to ensure policyholders that their coverage is secure.

The agency that helps insurance providers and policyholders is the National Organization of Life & Health Insurance Guaranty Association. It was founded in 1982, and they already have:

• secured 2.5 million insureds 
• guaranteed $22 billion coverage
• given roughly $6.2 billion for insurance promises

In case you are having a problem with your insurer, you may contact your state department.

3. Conversion Feature and Privileges

Many people are interested in getting a term life policy, but one needs to check for the conversion feature and the privileged offer by the insurer. All policies under term life have a fixed rate and time. Hence, they have an expiration date that you must keep in mind. Furthermore, if a policyholder outlives the term life policy, they will not get anything from the insurer. The insurance provider will keep all premiums you have paid for many years. 

Term life insurance is an excellent choice to give some protection to your family if something terrible happens to you, but it is temporary coverage. It is an affordable option than permanent life plan options like whole life, universal life, or variable life policies. Fortunately, there is a conversion feature that you get along with the term life coverage. 

Most insurers offer conversion feature along with the term life policy. Hence, it will allow policyholders to change to a permanent policy in the future. One needs to know the conversion guidelines, like the number of years allowed for the policyholder to change from term to permanent coverage. 

A permanent life policy is lifetime coverage with a guaranteed premium and cash value that serve as the investment. Getting a conversion feature is an ideal option for the policyholder as it will allow one to change the policy without the need to undergo a medical exam. Likewise, it can save you from the hassle and even higher premium in case your health fails.