How To Choose The Right Life Insurance Company

Among the decisions to make when you’re buying life insurance is what company to choose. With dozens of life insurers competing for your business, you might be tempted to choose a company based on price alone.

But there are other factors that are just as important as price—often even more important when you’re buying a long-term product like life insurance.

The right life insurance company can even change depending on what type of life insurance you’re buying. Here’s how to zero in on the best life insurance companies for your needs.

Don’t Choose a Company Based on Initial Price Quotes

There’s no doubt price is an important factor when buying life insurance. But if you settle on a company because of an initial price quote, you may be in for a bad surprise. Once the policy has been fully underwritten, meaning all of your personal and health information has been assessed, you could receive a final, higher price quote. Possibly much more than you were expecting to pay.

Instead, make sure you get multiple price quotes and be mentally prepared to shift course to another company if a final price quote comes in high.

Many companies ‘quote’ low rates to win on spreadsheet comparisons, but they are so picky in underwriting (risk selection), that after their evaluation of your medical history and lifestyle, their ultimate rate (offer) comes in much higher. This is often a huge disappointment to buyers and can sour their experience if they aren’t dealing with an experienced agent that can set appropriate expectations.

Also, a straight price comparison can cause you to overlook the underlying features of a policy, such as cash value life insurance guarantees and any return of premium features, which can have considerable value over the life of the policy.

The most important part of purchasing life insurance is getting the right policy for your needs—and what that means can be different for everyone, even when individual circumstances appear similar.

Consider Only Life Insurance Companies That Are Financially Strong

When buying life insurance, you enter into a contract (the policy) for the long haul. Since a payout on your policy may be decades away, especially with permanent life insurance types, you need a company that can weather ups and downs of the economy and financial markets.

Life insurance companies will generally post their ratings on their website, or ask your insurance agent. Financial strength isn’t solely a looking glass into whether a company will be able to pay claims in the future.  While past performance is no guarantee of future results, insurers with greater claims paying ability today are more likely to perform better between now and the time of claim, For instance, insurers with greater financial strength can be less likely to have to increase internal policy costs and premiums through challenging financial times.

The Right Company Can Depend on What Type of Life Insurance You’re Buying

Buyers of permanent life insurance have more considerations to make than buyers of term life insurance. Term life insurance may at first glance seem confusing, but it’s a relatively simple product. You choose your coverage amount and the number of years you want it to last.

Term life insurance places greater emphasis on flexibility and affordability, where permanent life insurance can work well for people with complex financial situations who are interested in using their policy to build cash value and potentially cover an estate tax.

Permanent life insurance buyers have to navigate a range of guarantees within the product, understand how fast (or how slow) the cash value will build, and get a handle on internal charges with the policy. A company that offers a good price quote on a term life insurance policy may not have a cash value policy that provides the best value over time.

If you feel like you’re at a considerable disadvantage when you’re buying permanent life insurance, it’s because you are.

Most consumers have very little understanding of how permanent insurance works. And while it’s unrealistic to expect consumers to become experts on all aspects of permanent life insurance, one critically important question to ask whenever buying any permanent coverage is, ‘How long is the coverage guaranteed (not just ‘projected’)  to remain in force at the illustrated premium?’ Strangely, there is essentially no accountability for the non-guaranteed projections in life insurance company illustrations. So pay attention to the guarantees. Projections are nothing more than guesses.