The main concern many of us face while investing in life insurance is choosing which insurance company to go with.
While insurers that are generally more recognized may seem better, their high monthly premiums may not be as affordable.
If you are looking to get life insurance for a lower price, it may seem daunting to commit to a risky company for the long term.
With proper planning, you can find the right life insurance company for your needs. Read on to learn more.
Don’t Choose a Company Based on Low Monthly Premiums Alone
Some companies may try to lure you in with lower monthly premiums. But not all policies are made equal.
Certain life insurance policies may increase their monthly premiums. For example, a 1-year pay policy may have the lowest price, but your monthly can go up every month!
Insurers can also advertise low rates for people in perfect health condition, but be picky during the medical exam and underwriting process. Thus, the final price of your policy may be much higher than the first discussed price. This is often called “getting a rating” in life insurance, which can result in your premium being two or three times higher than previously advertised.
Thus, it is helpful to not only compare rates across many carriers, but also their specific terms and conditions. An experienced life insurance advisor can help you with this process.
Your Health Conditions Can Determine the Right Policy for You
Each life insurance applicant is different.
Someone who smokes, or has a history of cardiac issues might be of a higher risk profile than others. Insurance carriers price this out in their actuarial pricing models. However, some carriers specialize in difficult-to-insure cases. Others may consider one type of medical condition critical, while others not so much.
In addition, there are specific types of insurance called simplified or non-medical which don’t require a medical exam. So, whether you are in perfect health, or suffer from several medical conditions, the pricing for these insurance policies is the same.
As a result, it’s important to compare rates from multiple life insurance companies. For example, one insurance carrier could charge you up to three times more because of the simple fact that you have diabetes.
Check if the Insurer is Financially Sound
Keep in mind that most life insurance policies are active for 20+ years. Hence it is important that you first an insurance company’s financial stability investing any amount.
All insurers are federally regulated, so their financial health is always verifiable online.
Some factors you may want to consider are:
- Years in business
- Number of customers
- Financial health ratings by companies with AM Best, Fitch Ratings, Moody’s Investor Services, Standard & Poor’s Comparison, etc.
Specifically, financial health ratings agencies look at factors like financial leverage, management stability, and assets/liabilities. They will also compare insurers to their competitors to get a full picture of their financial soundness.
Compare Prices Across Carriers
Finally, we have come full circle to again discuss one of the most crucial aspects while purchasing a life insurance policy – the price.
While it is easy to think that more expensive is better, this is not always the case. Many companies, like in any other market, engage in price wars. This means that they are trying to cater to different age groups with ‘premium deals.’
So, a lower priced policy doesn’t necessarily mean it’s lower quality. It may mean that insurer is trying to appeal more to customers in your target demographic. For example, you may find specific companies that offer lower life insurance rates specifically for seniors.
Many independent agents and brokers can assist you with this process. It doesn’t cost any extra money to work with a broker compared to going directly to a life insurance company (legally both policies have to be priced the same).
The Bottom Line
It may seem intimidating to invest money into a life insurance policy at first. Once you know what to look for, the process becomes much easier. By comparing rates across carriers, considering insurers’ financial strength, and looking at specific policies if you have a health condition, you can save a lot of money in the long run as well.
