Taking decision for a life insurance policy
Many people are in dilemma of choosing the insurance company to deal with when considering a life policy. They have constantly asked questions on where to take the policy, and have either been guided with or without fundamentals. The danger is that, taking a life insurance policy with a company that may not stay longer is some kind of risk, even though life policies are transferable in the event of the original insurance company being liquidated.
Therefore, while determining your life insurance needs and the type of life insurance coverage, the next challenge is how to choose the insurance company wisely.
In life insurance, even a ten-year term policy is a long-term proposition. You have to take into consideration whether your life insurance company will be around to pay the claim. This can be quite a challenge as there many insurance companies offering thousands of life insurance products out there.
Fortunately, there are some common sense guidelines that will help you narrow the field to a more manageable selection of companies and products.
Here Anthony Steuer, author of “Questions and Answers on Life Insurance” provides a benchmark evaluation for life insurance companies from a financial perspective, even though this might be a little strange to our market because many of the firms are not rated, but that is the way to go.
Many “net-savvy” consumers are pros when it comes to looking up and analyzing financial data on stocks, bonds, and mutual funds. Performing insurance company due diligence, however, presents a new challenge. Fortunately, many of the leading sources of information make their ratings and “analysis” available to the online public and almost all of it is free. Most likely this will change as the rating services will view this as an income stream.
Don’t get caught in the trap of simply comparing two companies and choosing the better one. Instead, hold each company up to a pre-determined set of benchmarks. If an insurance agent wants to sell a particular company or product, it is not uncommon for the agent to offer two or three alternatives that look worse than the one the agent wants to sell.
Finally, don’t assume that it costs more to purchase insurance from a top-rated company. Remember, product illustrations are poor indicators of how a policy will perform. Since insurance companies generally have comparable expenses, reserve requirements, and overall investment strategies, buying from the best does not necessarily result in higher premiums.
When selecting or evaluating a life insurance company, a logical place to begin is by reviewing the ratings given by the major insurance company rating services. In a rating, the rating company or agency expresses its opinion of the life insurance company’s financial soundness and creditworthiness.
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