Life Insurance

Choosing a Life Insurance Service Provider

The number of citizens covered by various types of life insurance policies in the USA has rapidly grown over the years, with the rate, according to statistics, exceeding 60% by 2018. However, regardless of this level of applicability, most people remain skeptical about life insurance, with many dismissing the necessity of their current policy. Life insurance is an essential financial tool and a pillar of personal finance that protects your loved ones after death, especially if they are financially dependent on you. This guide provides critical information about what you should know before you choose a life insurance service provider.

 

What is Life Insurance?

Life insurance, also known as life assurance in some countries, is a contract between an individual and a life insurance company. Upon the death of the insured, the insurance company promises to make a lump-sum payment to a designated beneficiary in exchange for premium payments. Life insurance ensures that certain financial obligations to your loved ones are covered even when you are gone. The money released to your assigned beneficiary may also be used to settle medical bills and funeral costs incurred at your demise. If you do not have people who financially depend on you, then life insurance might not be necessary.

 

The Cost of Life Insurance

Most people are skeptical about life insurance due to the perceived expense of such type of coverage. However, there are both affordable and expensive life coverage policies. How much premium to pay varies with different insurers and policies. The projection of your life expectancy profoundly influences the underlying cost of life insurance. For example, individuals who work under hazardous conditions might be necessitated to pay more. This is also the case for high-risk persons such as smokers, the aged, and those disposed towards health deterioration.

 

Types of Life Insurance

Life insurance is offered in two basic categories, including whole life insurance (also referred to as permanent insurance) and term insurance. Other subcategories of life coverage include variable life, variable universal life, universal insurance, group life, guaranteed issue life insurance, and indexed universal life coverage.

Term Insurance

This type of coverage is the cheapest and most straightforward form of life insurance. This policy is meant to offer protection over a specific duration, typically between one and thirty years. Term insurance is available for purchase at different prices within a specified timeframe. This policy generally pays if death happens during the set insurance timeframe. If this timeframe lapses before an occurrence of death, the coverage may be continued but at a higher premium payment.

Whole Life or Permanent Life Insurance

Permanent life insurance is known to be a cash value policy. This means that, in addition to covering your financial obligations after death, you can withdraw or borrow against your whole life insurance premiums while alive. The policy also comes with other benefits such as tax savings opportunities, lifelong coverage, and constant premiums. Whole life insurance pays death benefits at any time of your death. Due to the lifetime coverage offered in this policy, permanent life insurance is quite expensive. Its premium payments are quite high compared to term insurance.

 

Features to Look for When Buying Life Insurance

The US is home for hundreds of life insurance providers, ranging from giants in the industry to small regional players. These companies are open to offering diverse types of life insurance policies. It can, therefore, be overwhelming to know which company best suits your coverage and financial needs. Here are some features to look out for when buying life insurance.

Financial Ratings

When it comes to buying life insurance, it is of utmost significance to evaluate the financial ratings of a life coverage provider. This is because it is almost sure that a provider with a sub-par financial score will fall and drown into receivership. You can, for example, check how different companies rate with the AM Best Agency. This is a global credit rating agency that is inclined towards the insurance industry.

Underwriting Guidelines

Life insurance companies rely on their underwriting guidelines when making a decision on the acceptance, rejection, or modification of risks to be insured against. Underwriting guidelines vary with different life insurance companies. Compare the guidelines outlined by the various insurers to determine which company best suits your needs.

Life Insurance Products

It is essential to check on the life insurance products offered by various companies to determine whether they provide services you are interested in buying. Some insurance companies reward your healthy lifestyle with discounts on insurance products. For example, some companies will offer you a discount on their insurance policies as long as you use digital fitness tracking for your exercises.

 

In conclusion, a life insurance policy is essential if you want to give your loved ones a financial balance in your absence. Choosing the right life insurance provider should primarily be driven by your life insurance needs and the insurance company’s financial rating that will project its future. You would not want to choose an insurance company that will crumble down in a few years to come.