It is no easy feat to decide upon a life insurance policy. These multiyear financial contracts are intended to help your family after your death, so it is important that you choose your policy–and your provider–wisely. While there are certainly plenty of factors to keep in mind, there are a couple of key items that you should focus on when deciding who to entrust. Here are five points to follow when choosing a life insurance provider.
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1. The Company’s Reputation
The strength of any financial contract is dependent on the trustworthiness of your counterparty. This is especially true when it comes to life insurance.
The death benefit will (hopefully) only be paid out years into the future. Therefore, you will want to make sure that you do your research to identify a company that is standing on solid financial ground.
You can accomplish this by looking at independent rating agencies, such as S & P Global Ratings (previously Standard & Poor’s), Moody’s and AM Best. These will give you a sense of the reliability of the company you are considering entering into a life insurance contract with, and let you assess whether they will be able to make good on their commitments.
2. Product Offerings
There is no such thing as a one-size-fits-all approach to life insurance. There are plenty of different types of life insurance policies, though they can generally be broken down into term life and whole life insurance policies.
Everyone’s current finances and long-term needs are different, and your policy should be attuned to both. While taking care of your family’s future is important, it is also vital not to endanger your current finances by taking on obligations that leave you unable to meet your other needs in the present day.
Make sure that the products your prospective insurance company offers fit with your needs and current abilities to make premium payments.
3. Claims Processing
Assuming you pass away while your insurance policy is active, your beneficiaries will need to file a claim in order to receive the agreed upon death benefit. It is therefore helpful to fully understand the claims process of the insurance company you are considering.
There are two aspects to this: the ease of the process and the rate at which claims are paid out.
Insurance companies are obligated to settle an insurance claim within 30 days of receiving all the required documentation (such as the death certificate of the policy holder). Some companies have a practice of settling policies and providing the death payment much sooner and with fewer hassles.
The rate at which claims are paid out (also known as the “claim settlement ratio”) is a good indication of the reliability of the company. Those companies with higher claim settlement ratios should give you peace of mind that your beneficiaries will indeed receive the death payment that you are seeking to leave behind.
4. Customer Service
Companies with a reputation for good customer service tend to have happier clientele. This has relevance for life insurance firms as well.
You can discover this information by looking at customer reviews, as well as websites such as the Better Business Bureau (BBB). If the company has a number of complaints or legal issues, that can be a red flag and a strong indication that you should look elsewhere.
On the flip side, if the company has a number of positive comments and reviews from customers, that could be a persuasive argument that they are a good address for your life insurance needs.
5. Make Sure the Price Is Right
When shopping for any product or service, making a price comparison is generally recommended. For life insurance, however, this can be a tricky since it is not always easy to compare different products.
For instance, you would not want to compare the pricing of a term life insurance policy with that of a (significantly more expensive) whole life insurance policy. The same holds true of various terms, as it would not make sense to compare the numbers from a 10-year policy and a 30-year policy.
The premiums that you will pay will help determine the eventual death benefit that your family will receive. While it is a smart move to try and find a policy that charges cheaper premiums, you do not want to compromise on the quality of the company or the eventual death benefit.
Conclusion: Making the Right Decisions
Every financial decision entails balancing competing interests in order to find the best option. Life insurance is no exception, of course, which is why it is vital to spend some time researching both the policy and the provider that you are considering.
Like many things in life, there is usually no perfect choice that is head and shoulders above all the other options. However, there will likely be some policies that are better than others. Therefore, take the time now to understand which providers will be best-positioned to fulfill your life insurance needs. This can serve you well going forward.
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