Choosing the Best Term Insurance
Policy
The first step in choosing the right term life
policy is to make sure that the policy you are considering
matches
your objectives and solves your specific needs. Circumstances
are not the same for everyone, so a careful review of
what is important to you is necessary to select the best
policy.
How much insurance do I need? How
long do I need it?
After identifying your personal goals and determining the specific reasons for the insurance, you can begin to see how much insurance is really needed and how long the insurance must to be maintained. For more details on calculating insurance needs see, "Determining how much life insurance you need". A clear understanding of your insurance amount and level period requirements provides the starting point for considering other factors that determine which term policy is right for you. The other factors that are important to consider are price/value, underwriting, conversion privileges, and company financial strength.
Buy term insurance based on price
or value?
Most people buying life insurance
view term as a commodity. Therefore, many see policy
premiums as the chief differentiation
among competing policies. It is true that term insurance
builds no cash value and if the term period is outlived
there is no measurable return on policy premiums. However,
there are numerous reasons to look beyond price. Paying
the lowest price is very desirable but not at the risk
of selecting a mediocre insurance company or having reduced
policy options in the future.
Many of the insurance companies offering the cheapest
term life rates are smaller "niche" companies.
Generally, these companies have total assets of $2
billion or less. In fact, most term insurance shoppers
have never heard of many of the insurance companies
that sell cheap term policies. This is not necessarily
a bad thing as many of these companies do carry reliable
ratings from the various independent rating services.
However, you should always consider value along with
the cheapest price.
Value is as equally important as price. In most cases,
term insurance shoppers can obtain a policy from a
large nationally recognized insurance company for only
a slight increase in price usually less than 5-10%.
These companies have total assets in excess of $10
billion or more and maintain the highest ratings from
the independent rating services. Furthermore, many
of the larger companies offer better conversion options
and renewable features than their lesser known competitors.
Having these additional options and features may not
be readily important to you now, but down the road
may mean the difference in being able to maintain competitively
priced insurance or being forced to pay premiums that
become cost prohibitive over time. To get the most “bang
for your buck” and make the best term insurance
policy choice, don't buy on price alone! Always consider
value.
What is term life insurance underwriting?
In order to obtain any life insurance coverage, you must
provide evidence of good health. Underwriting is the
process insurance companies use to identify a specific
risk and to determine which rate a given individual may
obtain for a specific amount of insurance. Underwriting
guidelines are used by insurance companies to define
the risk associated with your application for life insurance.
For a breakdown of theses generic guidelines see, “Determining
your health class”.
Each life insurance company has its own underwriting
guidelines and list of health classes ranging from “preferred
plus” (best class) to “standard” (average
class). An individual in great health will qualify for
the preferred plus health class and will pay less for
their insurance than an individual qualifying for a standard
health class. The difficulty is in identifying how the
individual companies will view your health based on their
guidelines.
In order to select the best term life policy, you need
to have a good understanding of how each competing insurance
company will view your specific health. Underwriting
varies widely among insurance companies and can have
a significant impact on policy pricing among competing
companies. Small things like taking a medication for
mildly elevated cholesterol may increase the rate by
25 % with Company A but may not have any impact at all
on Company B’s rate. Therefore, knowing which company
will offer you the best rate based on your circumstances
is critical to obtaining the best priced policy. An experienced
agent is crucial in helping you select the insurance
company that will provide you the most favorable underwriting.
Please call us toll free at 1(877) 583-3955 and an insurance
professional will help answer your specific underwriting
questions.
Conversion privileges and term life
Another important consideration for selecting the best
term life policy is the conversion option offered by
the insurance company. The conversion privilege is a
feature in a term life insurance policy that allows the
covered individual the opportunity to convert or "exchange" the
existing term life insurance policy for a permanent whole
life or universal life policy without evidence of your
insurability. The length of the conversion period varies
in among competing companies. When comparing term insurance,
the policy that offers the longer conversion period is
usually the better choice.
The option to "convert" your term policy can
be very valuable if you are diagnosed with a health condition
such as cancer, stroke, uncontrolled diabetes, heart
problems or any terminal illness. In these circumstances,
your ability to purchase life insurance may be in question
or rates for new coverage may be cost prohibitive. The
conversion privilege assures the covered individual that
life insurance can be maintained at a level rate after
the term period even if there is deteriorating health
that otherwise was uninsurable. The cost to convert the
term policy to a permanent policy will be higher, but
the insurance company will never be able to price you
out by continuously increasing policy premiums or deny
you valuable insurance protection based on health issues.
Buy your term life policy from a highly rated insurance
company
Why try to save a few dollars and end up with an insurance
policy from an inferior company? There are plenty of
highly rated insurance companies offering very competitive
term policies. When comparing companies, you should definitely
review the independent rating service’s rankings.
Comparing the financial strength of each insurance company
will help to choose the best term life policy.
Financial ratings for most insurance companies are available with one or more of the independent ratings services. These services include AM Best, , . Each of the independent rating services has its own criteria for ranking an insurance company. You may also visit the websites of each of these services or you can contact MEG and we can provide the financial ratings of any insurance company. When you obtain a quote for either term life insurance or guaranteed universal life insurance, you will see the AM Best rating for each company listed. We recommend using companies that have at least an “A” rating with AM Best but prefer “A+”.
How to obtain the best term policy
There are numerous considerations when trying to choose the best term life insurance policy. Some of these factors include the insurance amount needed, term period required, premium pricing and policy value, underwriting guidelines, conversion privileges, and company financial strength. While each of these things should be examined independently, they should also be considered collectively. By reviewing all the factors together, you will select the policy that offers the combination of great value, fair underwriting and excellent features with an insurance company that maintains the highest financial integrity. For assistance in determining the insurance policy that works best for you, please call MEG toll free at 1 (877) 583-3955.
INSTANT TERM LIFE INSURANCE QUOTE
