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There are nearly 800 life insurance companies across the US, according to the Insurance Information Institute. With so many companies to choose from, picking a provider can be overwhelming. These are the questions to ask before you buy coverage.
Life insurance is an investment in your family’s financial future, so you want to make sure you’re with a provider who meets your needs. When you’re comparing life insurance companies, consider the following questions:
Confirm the company’s financial strength. This is important because your beneficiaries might not file a claim for years — or even decades to come. In the US, there are four major ratings agencies that assess insurers’ financial stability: AM Best, Fitch, Moody’s and Standard & Poor. Each agency uses unique criteria and its own grading system, which means you might see different ratings for the same company.
These are the strongest ratings for each:
If you come across an insurer with a low rating, it might not have the financial resources to pay out claims.
The size of a company doesn’t always reflect its financial stability. There are many small and medium-sized life insurance companies that have proven financial strength, and larger companies that have fallen behind in their financial obligations.
Read reviews and complaints on consumer sites like the Better Business Bureau and TrustPilot to find out how the company treats its customers. The BBB assigns ratings to companies based on customer service, interaction and timely response to complaints. The highest possible rating is A+.
You can also search the National Association of Insurance Commissioners (NAIC) website. NAIC awards each insurance company a complaint ratio score, which is based on the number of complaints made to state insurance departments in relation to the insurer’s market share. The median score is 1, so any score lower than 1 means the insurer has less complaints than the average company.
You can also confirm details on your state’s insurance department website. Since life insurance laws vary by state, these departments are responsible for regulating the industry. They track things like complaints, claims disputes, misleading sales information and policy cancellations.
Some providers offer a full suite of term and permanent life insurance policies, while others have a more niche focus. To narrow your list of providers, review each one’s product lineup to make sure it offers the type of policy and coverage amount you want. Then, look at the list of riders to learn how you can customize your coverage to suit your needs.
Some insurers have unique policy features and riders that might appeal to you. For example, John Hancock offers discounts and rewards for wearing a device like a FitBit and meeting the health and fitness goals set out in your policy.
Be wary of brokers and agents who push for permanent life insurance. They can earn a much higher commission on whole life, variable life and universal life products, so it’s important to do your own research to make an informed decision.
Each insurer has its own underwriting standards, so you might be offered different rates for the same policy. To make sure you’re getting the best possible premium, take the time to shop around. Get quotes from a range of insurers, and see how the rates compare.
Some insurers are stricter than others. If you’re quoted an expensive rate by one company or denied coverage altogether, don’t give up — you might have better luck with another insurer.
Find out if the company is mutually owned. While publicly traded companies are owned by stockholders, mutual companies are owned by their policyholders. As a result, policyholders might earn annual dividends based on the company’s profits. You can choose to collect the cash, or use the money from dividends to pay your premium or pay off policy loans.
You’ll need to hold a permanent policy, like whole life, to receive dividends. And they’re not guaranteed — but some companies have consistently offered dividends for years. MassMutual is one of them. The insurance giant has paid out dividends every year since the 1860s, and approved a record $1.72 billion payout to policyholders in 2019.
To drill down even further, ask your insurer these key questions. Their answers should be honest and transparent.
Ultimately, the best life insurance company is the one that aligns with your values and needs. After you confirm a company’s financial strength and customer reputation, make sure they offer the kind of coverage and riders you want.
Before choosing a company, compare life insurance providers to see how their rates stack up.
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