are so many life insurance companies. How do we know which one you can trust?"
Selecting a Life Insurance Company: The choice of a lifetime
The 2008 market crash has damaged consumer confidence in banks, investment companies, and even life insurance companies. After all, if AIG could fail, who is immune. Will you purchase insurance from a company that might be bankrupt tomorrow. How will you know? There is, however, little need to fear when it comes to life insurance. Our website will help guide you.
There is something you should know about insurance that will provide some reassurance and that separates life insurance and fixed annuity products from the failing banking and financial industry. First, regardless of company ratings, all insurance companies are backed up by an important organization called the “Guarantee Association.” Insurance companies are required by law to pay for a membership in the association. If the company ever experiences financial difficulties, the Association provides the mechanism for other companies to purchase the policies and make good on all the claims. Thus, you will never have to worry about your life insurance failing to pay . Therefore, you can purchase life insurance and rest assured that if tragedy strikes, your family will be protected.
The second important bit of education is to know both the type of insurance you want and the type the company provides. You also need to know if the company’s policies are “convertible,” meaning that when your finances are better, you will have the option of converting a Term to Universal or Whole Life.
Finally, it isn't a bad idea to know something about the company itself. You might think that if a company as enormous as AIG can fail, no one is safe. The ratings alone of a company in today’s markets may not tell you what you need to know. Instead, ask about the company’s balance sheet. Talk to your investment or financial advisor and ask which companies are on the “watch” list. Even though you may not be in search of a brokerage account, an investment broker will know which company polices he is prohibited from selling. While you could buy life insurance with no risk, you might prefer to work with a company that has been evaluated as “sound” and financially stable.
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. There are many more, but these are some household names that are not on anyone’s watch list.
Major types of life insurance policies
To avoid disappointment you need enough education about insurance in general to know what kind you are getting. The three basic types are Term, Whole Life, and Universal. Term, as the name implies, insures you for a specific time period, usually 20 years. At the end of that period, you can convert to something else the company offers, but waiting that long usually means you will end up with something much more expensive than you had expected during your retirement years. Whole life, which lasts your entire life with the same premium and face value throughout, seems more expensive, but in later years the level premium will more than compensate for the higher expense on the front end. Universal Life captures the features of both Term and Whole life by providing a flexible premium at a lower cost than Whole Life along with a face value that can be adjusted as your needs change. A universal can be funded like either a Term or a Whole life.
Minor insurance variations
The three major types come in numerous variations which mean different things to different companies. Such variations include graded benefits, modified whole life, modified term, key man insurance, pre-needs insurance, joint & survivor life insurance, and first to die insurance. If the three basic types don’t quite do what you want, ask your agent about variations that might work for your situation.
More important than price
Price is usually the first thing people consider when purchasing life insurance, but this is a mistake. Instead of simply purchasing the cheapest thing that comes your way, a good strategy is to analyze your financial situation, decide what premium you can pay now and should be able to pay on a continuous basis, and then ask your agent what type of insurance you can get for the money you have. If nothing is available that fits your budget, perhaps you need to make some adjustments in your spending or look for some other means of funding an appropriate policy. Remember, usually when you find something that is almost too inexpensive to be true, it probably has some surprising caveats that will make you unhappy in the future. Furthermore, once you have the policy, especially if you purchase it by mail order, don’t count on getting help from a real person. When you purchase life insurance all on your own, you are on your own for getting claims paid as well. Having a life long agent who knows your family and your situation is worth paying a few extra dollars for.
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