Whether you are purchasing term
insurance or permanent life, one of the most important issues to
consider is the financial health of the company that’s providing
the insurance. After all, you want to make sure the company will
still be in business when your beneficiaries need that payoff. To
check the financial health of an insurer, you should turn to one
or more of the companies that make a business of analyzing players
in the insurance industry. There are about a half dozen such
rating services, with the best-known including
Standard and Poor’s,
A.M. Best, Moody’s, and
Duff and Phelps
Each of these services grades the
life insurers on financial strength, using letter grades to
indicate how secure they consider the company. The actual grades
vary by rating company. S&P uses AAA as its highest, for example,
and Best uses A++.
Along with financial health, you
want to choose a company that is responsive to its policyholders.
That’s why it is a good idea to check with your state’s insurance
regulating body to
make sure there are no serious complaints against any of the
companies you are considering.
Another factor that can influence
which policy to choose is the availability of riders that you want
to purchase. With a term policy, for example, you might want to
make sure the policy is guaranteed renewable, so that you could
continue to have insurance even if your health deteriorates and
other companies might consider you uninsurable. Perhaps you would
want a convertible policy, which allows you to switch from term
insurance to whole life with no questions asked, another way to
guarantee that you can purchase insurance even if your health
declines.
When deciding among permanent life
policies, you should be interested not only in the death benefit,
but in the potential growth of the cash value that these kinds of
policies offer. Because these policies are more complex than term
policies, you may have to dig a little deeper to make your
comparison.
For each policy, your agent will
present a number of illustrations showing how the cash value might
grow, based on various assumptions about fund returns, fees and
other factors. Make sure the assumptions used in the examples are
based on the company’s recent experience. Find out which figures
are guaranteed. Go with the most conservative estimates -- compare
policies based on the assumption that they will earn the lowest
return presented and you will incur the highest charges presented.
When you are buying a variable or
universal life insurance policy, another issue to consider is what
funds are offered. In these kinds of policies, you direct where
you want your investment to go. Generally, the insurer will offer
a range of investments, from safe, fixed-income funds to stock and
high-yield bond funds which offer the potential for more income
but which come with a higher risk.
Fees can be another concern for
permanent life policies, especially if you are planning on tapping
into that cash value. To fairly compare policies, take a look at
fees, including management fees and penalties that could
eat up
your cash value if you decide to surrender the policy.
Please feel free to
contact our insurance agency
at any time and speak with one of our highly
qualified representatives. For over 20 years our agency has been
providing families with quality insurance products & services.
