With so many options for life insurance, it can be difficult to find the perfect provider to suit your needs. But with this guide on how to choose the best life insurance company, you will know exactly what to look for in a plan.
What Is Life Insurance?
Life insurance is a contract that you take out from a life insurance provider like any other type of insurance. However, life insurance will cover you if you die unexpectedly and give your loved ones the funds they need to pay for their expenses. By paying set monthly premiums, you will receive peace of mind knowing that should something happen to you, your family will have the means to move forward with their lives.
Whey Should I Get Life Insurance?
There are many reasons why an individual should get life insurance. However, the main reason that many people take out a life insurance policy is to secure enough money for their family should you die. Life insurance is especially important if you are the main source of income for your family because if you die, then they may not have the funds needed to pay bills, keep up with the mortgage, or otherwise maintain their lifestyles.
Other than bills, however, life insurance can cover much more. For example, your life insurance policy may cover:
- Funeral expenses.
- Unpaid medical bills, student loans, or personal debt.
- Inheritance funds.
- College for your children.
- Tax-free advantages for transferring wealth.
- Paying off estate taxes.
- Securing a mortgage or debt from a lender.
What Factors Should Be Considered When Selecting a Life Insurance Policy?
When choosing a life insurance policy, there are many factors to consider. To choose a policy and provider that are right for you, make sure you take all of the following factors into consideration.
- Don’t Choose a Company Purely Based on Initial Quote
Like any insurance, you don’t want to pick the first quote you get. Instead, you should shop around and get multiple quotes so that you an compare the prices, the contents of the policy, and any other information that you should know about the provider. This step is crucial to your search, but there is more to know about choosing an initial quote.
More often than not, the initial quote is used to draw potential policy holders in. The insurance provider may give a surprisingly low initial quote, and you may feel tempted to jump on that offer because it simply seems too good to be true. However, this quote may in fact be too good to be true, which is why you should always take your time to evaluate each quote, the policy, and the fine print. Many companies that want to seem better than their competitors will quote low initial rates but have very picky underwriting policies that increase the monthly premium.
Once the policy is fully written, that is when you will receive the true quote. Because of this, you may have a higher actual payment than the first initial quote. Now, this could be due to multiple reasons that is not malicious intent of the insurance company. For example, you may go through with your medical exam and find an underlying condition that you weren’t aware of, or maybe you forgot to tell the insurance company that your preferred hobby is rock climbing.
So really, the low initial quote is simply bait to get you interested in a life insurance company. Once you receive a quote, make sure you look over the policy and everything that it will entail before you sign the contract.
- Don’t Use Financial Strength Ratings
Because you will be signing a contract for life insurance, you should expect to hold the policy for a long time. Especially if you are interested in permanent life insurance, you should consider the company’s financial strength. The financial strength of a life insurance company is their likelihood of increasing their worth despite the ups and downs of the economy.
When you take out permanent life insurance, you expect to see the money within your policy grow over time. If a company cannot grow your money, you might as well have taken out a term policy for all the good it had done.
One way to evaluate how well a life insurance company can remain stable is to look at their financial strength ratings. These ratings can usually be found on their websites, but if you are using a life insurance agent you can likely ask them about the company’s ratings.
However, past performance does not guarantee future gains, so you should take the financial ratings with a grain of salt, meaning you should not jump on a life insurance plan purely based on the ratings. Even if you do find a life insurance company that has rating in the A range, you should evaluate the progress of the company, their investment strategies, and talk to your agent to see if that plan is right for you.
- Do Factor in the Type of Life Insurance You Want
Generally, there are three types of life insurance that are offered by providers. When looking for a life insurance provider, you should consider the types of insurance that the company has to offer. For example, if you know you want term life insurance, you should look for a company that offers the lowest premiums.
However, if you know you want to start with term life insurance but plan to switch to whole life insurance in the future, you should look for companies that offer a convertible plan. Additionally, not all providers will offer insurance plans for individuals over the age of 65. So if you are older and are looking for a life insurance plan, make sure you choose a provider that offers plans for older clients.
To make your search for the right policy easier, read through the descriptions below to select a life insurance policy that best fits your needs.
- What are the 3 Types of Life Insurance?
The three types of life insurance are term life insurance, whole life insurance, and universal life insurance. It’s important to know which policy you want before you look for a provider because some companies have better plans for one type of life insurance over the other.
- Term Life Insurance
Term life insurance is purchased for a specified length of time. While the typical lengths vary anywhere between 10 years and 30 years, the exact length will depend on the life insurance company and plan. Term life insurance is also the least expensive life insurance plan and is thus one of the more popular choices.
Unlike the other types of life insurance, term life insurance will not have any cash value at the end of the plan. However, if you opt for a convertible term life insurance plan, you may turn this plan into a whole life insurance policy.
In general, those who choose permanent life insurance (whole or universal life insurance) do have more to consider than those who want term life insurance. This is because term life insurance has a distinct end date that will determine your coverage. Those who want permanent life insurance, however, need to consider the rate of cash flow, whether company has the right to make changes to the policy, and how much their investments are expected to grow.
- Whole Life Insurance
Whole life insurance will have a set premium and will remain valid for as long as the user pays the monthly premiums. The price of the premiums will depend on the insurance company, your age, your health conditions, and how much your life insurance package will pay out if you pass away unexpectedly.
Over time, whole life insurance plans will build up a cash value that can be returned to you if you cancel your plan. In some cases, you can also take loans out from your whole life insurance plans like you would with a 401K.
- Universal Life Insurance
Universal life insurance is similar to whole life insurance in that it is a permanent plan, meaning there is not set term when the plan will end. What makes universal life insurance different than whole life insurance is that with universal, you will get opportunities to make investments.
Moreover, universal life insurance may have adjustable monthly premiums that can be changed based on investments, cash flow, or loans you take out from the insurance policy.
- Evaluate Your Health Conditions
The same policy can vary depending on the applicant’s health condition. So when comparing life insurance policies, your health condition matters. Depending on the provider, some companies will provide better rates for those with good health. This reason is why most credible life insurance companies require a medical examination.
For example, some life insurance providers will have better offers for those who do not smoke or to those who are heart healthy. Because your unique set of health conditions will have an influence on a policy’s rates, you should always shop around for the best life insurance quotes in terms of health conditions.
- Affordable premiums
- Fast and convenient quotes
- A+ rated carrier
- Easy sign-up process
- Affordable rates
- No need for medical exams
- Up to $3 million of coverage
- Very low premiums for young people
- Easy online applications
- Evaluate Your Age
As mentioned in the sections above, your age will have an impact on your life insurance options. Because not all providers will offer plans for those who are 65 and older, you should look for providers that do offer plans for older clients.
Generally, it is easier to get a life insurance policy when you are younger. So, it may be best to evaluate your need for life insurance early in your life. When you are younger, you can opt to take out a term policy plan and then switch to a whole life insurance plan later in life.
- Evaluate Your Lifestyle
Some life insurance policies will not insure those who hold what they consider to be “risky” jobs, such as construction, welding, pilots, or any other labor job that can result in deadly situations. However, there are some life insurance providers that will insure those with risker jobs at a higher monthly premium.
When searching for a life insurance policy if you have a risky job, make sure you find multiple companies that offer plans for your occupations. Once you have found several options, compare the quotes you receive and choose the plan that is right for you.
Aside form occupation, life insurance companies sometimes will not insure those who have risky hobbies, such as sky diving, rock climbing, hang gliding, or any other activity that puts the individual’s life more at risk.
So if you do partake in more dangerous hobbies, you should look for life insurance providers that are more lenient to what they consider to be dangerous. Or, you should simply look for policies that will insure those who have risky hobbies even if the rates are at a higher price.
Now that you know what to look for in a life insurance plan, it’s time to begin looking for the right life insurance company for you. Luckily, our experts have reviewed the best life insurance companies currently available and have crafted reviews on what to expect from each. Instead of spending hours researching online, check out our expert guides on the best life insurance companies.
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.