How to Choose the Right Life Insurance Company
How to Choose the Right Life Insurance Company
With so many life insurance companies to choose from, finding the right company for your situation can be a bit overwhelming. It is important to choose the right life insurance company considering the fact that you will most likely have your life insurance policy for a long time. Choosing the wrong company could lead to paying higher premiums than necessary and other problems the down the road. We’ve outlined some improtant factors to consider that will help make the decision process easier when determining how choose the right life insurance company.
Financial Strength
A life insurance policy is only as good as the financial strength of the company that issues it. That’s why it is important to choose a life insurance company that is financially stable. There are a several companies out there that rate life insurance companies based on financial strength. The main credit rating companies are A.M. Best, Moody’s, Fitch and Standard and Poor’s. A company rated ‘A’ or better shows a strong capacity to meet its financial obligations.
| S&P | Moody's | Fitch | A.M. Best | General Description of Rating |
|---|---|---|---|---|
| AAA | Aaa | AAA | aaa | Minimal Credit Risk |
| AA | Aa | AA | aa | Very Low Credit Risk |
| A | A | A | a | Low Credit Risk |
| BBB | Baa | BBB | bbb | Moderate Credit Risk |
| BB | Ba | BB | bb | Substantial Credit Risk |
| B | B | B | b | High Credit Risk |
| CCC | Caa | CCC | ccc | Very High Credit Risk |
| CC | Ca | CC | cc | In or near default with possible recovery |
| C | C | c | In or near default with possible recovery | |
| D | C | D | d | In default with little chance of recovery |
When choosing a life insurance company, it is important to focus on ones that are ‘A’ rated or better. Life insurance companies that are highly rated will have a much better chance of weathering any major downturn in the economy compared to lower rated companies. The good news is that overall most life insurance companies are financially stable and are required to meet stringent financial guidelines set by regulators.
Premium Cost
For consumers, cost is arguably the number one most important factor when purchasing life insurance. The good news is that many of the best ‘A’ rated companies have lowered the cost of term coverage over the last year. You can find them if you use an independent agency like ours to shop your coverage. Unfortunately, there are many companies out there that simply aren’t competitive when it comes to term life insurance pricing. If you don’t shop around, you could pay 60% or more for coverage than necessary. In most cases, there is absolutely no difference in coverage features whatsoever between a lower priced policy and one that is more expensive.
Flexible Underwriting
Every life insurance company has its own underwriting guidelines. Some companies are more stringent than others. If you are in excellent health, you are at an advantage as you will have more options than someone with health issues. There are some companies that are a bit more lenient when it comes to underwriting applicants with health issues such as diabetes, Crohn’s disease, asthma and anxiety to name a few. Some companies also offer better rates for marijuana smokers or tobacco users. The key is to find the company that is the best fit for your situation. If you choose the wrong company, you could end up being declined coverage or paying higher rates than necessary.
Generous Term Conversion Feature
When you buy a term life insurance policy, you have the opportunity to convert your term coverage to permanent coverage without proof of insurability with most companies. This could come in handy if your goals change over time and you need some permanent coverage or if your health changes and you want to lock in your original health rating on permanent coverage. Some companies allow you to convert to ANY of their permanent products while others offer limited choices. Often, companies that offer limited choices for conversion don’t allow their best permanent products as a choice. You should also consider a company that allows a conversion credit. A conversion credit allows you to reduce the first year premium on your new policy by the amount of premium paid into your term policy in the last 12 months.
Solid Line of Life Insurance Products
You never know if you’re going to convert your term life insurance coverage to permanent coverage but why not give yourself the best options? It is important to find a company that can offer a wide range of solutions for your life insurance needs. Finding a company with a solid term product and a wide array of permanent products will ensure that you won’t get stuck with an inferior product if you decide to convert your term coverage. Some companies offer a wide range of permanent products such as whole life, universal life, guaranteed universal life, indexed universal life and more. It’s best to work with an independent agent who can show you multiple options when it comes to product offerings.
Innovative Products
Life insurance products have evolved over the years. Here are a few examples of the innovative life insurance products and features currently offered.
You can now buy term coverage that includes chronic and critical illness riders, which allow you to access your death benefit for qualified chronic and critical illness expenses. You can also purchase some permanent life insurance products with a long term care rider which allows you to access the death benefit for qualified long term care expenses.
John Hancock has introduced its Vitality program which allows policyholders to reduce their premiums and earn annual rewards for simply living a healthy lifestyle. Your activity is monitored with a free FitBit device that you receive when you purchase your policy.
Principal Financial offers up to $1,000,000 of coverage without a medical exam for those who qualify. This is a game changer for healthy individuals who don’t want the hassle of having to take a paramedical exam. Principal also has some of the most competitive premiums in the industry.
The life insurance industry continues to evolve. It has never been easier to tailor a plan specific to your life insurance needs.
Use an Independent Agent to Show You Multiple Options
An independent agent can shop your coverage to multiple companies and specifically tailor your coverage based on price, policy features and your specific underwriting situation. You should never limit your options for life insurance coverage. There are so many variables that come into play when applying for life insurance such as financial strength of the company, underwriting sweet spots and product features. It makes sense to do a thorough search so that you are matched with the right company.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
