When it comes to purchasing life insurance, most people focus on the type of policy, benefits, and premium payments they must make without considering the strength of the company itself. After all, what good is a life insurance policy if the company that provides it will not be around when you need it?
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Before you make the purchase, it is best to check out the overall strength of the insurance company in terms of its finances, reliability, and longevity so that you can rest assured the life insurance you purchase will be around when needed.
The Importance of Financial Strength:
The stronger a life insurance company is financially, the better choice they are in terms of purchasing a policy. This is also true of auto, home, and health insurance as well. You can start by checking out companies such as A.M. Best Ratings or Standard and Poor’s rates as they provide you with the important information needed to see if the company is financially sound.
Longevity: There are other aspects that you should consider as well starting with longevity. The longer the company has been around, the more likely they are to stay solvent and be there for you when your policy matures. However, this is not the only measuring stick you should use to evaluate an insurance company.
Reliability: You can check out customer review sites and independent groups such as the Better Business Bureau.
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Response to Claims: The insurance regulator office in your state keeps track of the compliant history of every company that falls under its jurisdiction. You can call them or check out their website to see if the insurance company has a good history of responding to claims. J.D. Power and Associates also keep track of the payment history of claims, customer satisfaction, and overall communication.
In addition, Consumer Reports is an excellent, independent group that you can go to and see if the insurance company is on the up and up. You may need to pay for an annual subscription to see their information, but what they offer is excellent research in a wide variety of fields. Also, you should compare the ratings of different companies in order to find the one that best suits your particular needs.
What is a Company Rating?
Basically, this is the financial rating that comes from four different agencies;
- M. Best
- Fitch
- Moody’s
- Standard & Poor’s
While each company has its own standards and rating scale, it generally follows that the higher the rating, the better the company. In addition, each company uses pluses and minuses to differentiate the ratings much like the grades on a report card.
You will need to get the ratings from an independent source and not rely on what the insurance company tells you. Plus, you will need to understand how the ratings work in each of the four organizations as they are different to a certain extent.
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Once you have all of this information, you should be able to make an informed judgment as to the financial stability of an insurance company. From that, you can choose the best life insurance that suits your needs from a company that will most likely be there when you need it.
