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If you have searched for
life insurance, you're biggest hesitation has probably been a fear that
the company may go bankrupt, or may find some excuse to avoid paying when
you need to submit a claim.
Two bits of education can
put you in the driver's seat when it comes to choosing a policy. The first
is to know the kind of insurance you want and know whether or not any
given company offers it—as well as what conversions are available if you
should need something different I the future. The second is to know
something about the company itself. Neither piece of that puzzle takes a
college degree or a month of research.
The following (in no particular order) are examples of top, nationally
known companies, with solid financial ratings that have a wide variety of
products designed to meet your needs.
- Metropolitan
- United Wisconsin Life
- Bankers Life & Casualty
Company
- Fidelity and Guarantee
Life
- American General Life
- New York Life
Major types of
insurance
Three major types of insurance are offered by insurance companies today.
They are Term Life—which is cheap, but either expires or goes up in price
at the end of the term, Universal Life—which is a flexible premium policy
with a lot of built in options that prevent you from lapsing your policy,
or Guaranteed Whole Life—a type of policy with a set premium and a benefit
that can never change and will be paid directly to you if you live to be
100 years old.
Minor insurance
variations
Several other types of insurance policies are available and are written in
the terms of one of the major three. For example, key man insurance, joint
life insurance, and second to die insurance can all be written as Term,
Universal, or Whole life. If you know the basic type you are looking for,
and also know the purpose of the insurance, a knowledgeable agent will be
able to explain any variations the company may offer.
More important than
price
We spend most of our lives looking for bargains, always hoping to get the
biggest benefit for the smallest reduction in our check books. Thus, it is
no surprise that when looking for life insurance, the first thing many
folks consider is the size of the face value compared to the size of the
premium. However, insurance should never be purchased on the basis of
price alone. Granted, price is important because if we can save a dollar
on one thing, we have to put on something else. And, if a company is
radically higher than other companies for the same type of insurance,
they'd better have some impressive interest rates or built in features, or
they won't be in business very long. On the other hand, if a company is
radically cheaper than all the competitors for the same product, you need
to ask how long it takes to settle claims and whether that company has
actually been bought up by a larger company. When you need help, will you
be giving the 800 number run-around and told you have to contact your
agent (who may not be with the company any longer), or will you promptly
be given the help you need.
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Getting at the truth
But how do you find out who is really reputable? No agent is going to tell
you that his company takes several months to pay off. He couldn't keep his
job very long if he did. You can begin by asking your friends who they
have; also, talk to a funeral director and find out which companies pay
with the least hassle.
Now, be aware that a funeral
director has the license to sell you a "pre-needs" insurance which is
simply a life insurance policy for which you pay the premium while the
funeral home receives the benefit. However, if you are direct with your
questions and clearly indicate that you want to know which insurance
companies have been the easiest to work with and the most dependable, the
funeral director should be willing to tell you.
A third opinion
An unbiased report on any company can be obtained from any of the five top
insurance rating companies.
-
, (908) 439-2200
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Standard & Poor's, (212)
438-2000
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, (800) 289-9222
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,
(312) 368-3198
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, (800) 811-6980
Ratings furnished by a third
party company are on the financial strength of the company itself. It is
not a comment on the quality of the product. Even if you choose a company
with a lower rating—in hopes of a lower premium—you do not have to worry
about the company being unable to pay due to bankruptcy or other financial
problems. By law, any insurance company must pay into a company called the
"Guarantee Association." This organization protects you—the client—and
insures that in the event of financial problems, other companies would buy
up the book of business and would pay off on any policies sold by that
company. Furthermore, in a free-enterprise economy, major companies do
merge with others, and sometimes get bought up by other companies even
when—(often because) they are financially solid. Purchasing a solid
company can improve the ratings for both the purchaser and the purchased.
The most reliable indicators of strength are the total assets, the
outstanding debt ratio, and the overall size of the company.
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