Monday, 31 October 2016

How I Found the Best Life Insurance | Help

I assembled a list of 67 nationwide life insurance companies using the Insurance Information Institute’s “Find an Insurance Company” tool and A.M. Best’s Consumer Insurance Center.



After talking to experts, reading up on the industry, and scrutinizing policy details like term life insurance rates, it turned out that only six of the 67 offered all the features I’d want in a provider.

That said, I only included companies in my search that don’t have special membership requirements. There are plenty of excellent regional insurers, as well as great membership carriers like USAA, and if you’re eligible for those, you should get quotes from them too. 

Last caveat: I didn’t factor in premium amounts.Of course, cheap life insurance seems better, but it’s only actually better if you have the coverage you need. Also, even if you and I both purchased the exact same policy from the same insurer, it’s unlikely we’d pay the same premiums, since there’s so much person-specific data that goes into determining those amounts. It’s impossible to evaluate a provider on their premiums alone — you’ve got to get quotes.

The best life insurance companies have five things in common.

They underwrite their own policies.

It turns out that not every life insurance company actually owns the products it sells. Some, like GEICO, merely service others’ policies, making them unnecessary middlemen. I don’t like the idea of an extra layer of separation if I want to change or cancel my policy. The last thing I want is for someone I love to have to jump through extra hoops to collect my death benefit, or for there to be confusion about who is cutting the check. Direct contact with the company underwriting my policy should eliminate those concerns.


There’s zero doubt about their ability to pay on a claim.

This is a no-brainer, but it needs to be said: You should only buy a policy that you’re confident will be honored when it comes claims time. Financial Strength Ratings (FSRs) from independent agencies are the best indicators of which companies will still be around decades from now. The Insurance Information Institute recommends getting ratings from two or more, and all of my top picks score high across the board. They each have at least a “Superior” (A+) rating from A.M. Best (the insurance industry’s number one rating agency), as well as a “Very Strong” (AA-) from Standard & Poor’s, or an “Excellent” (Aa1) from Moody’s. My two top picks have even higher ratings than that: TIAA and New York Life have an A++ from A.M. Best and an AA+ from S&P.

You’ll be able to renew your policy past its original term without another medical exam — guaranteed. 

“Guaranteed renewability” means you can renew your term policy for additional years beyond the term limit, without being forced to take another medical exam. This provision becomes crucial if you develop a serious illness near the end of your policy’s term, since it guarantees you can maintain coverage even if no one else will insure you.
It doesn’t mean your premiums won’t go up. In fact, they will — and dramatically — for two reasons. First, you’re older, and therefore a higher risk of needing to use your life insurance. Second, the fact that you’re renewing tells your insurance company you have concerns about your health — if you didn’t, you could get a cheaper rate on a new policy with a medical exam.
If you do choose to renew your term policy, it operates on a year-to-year basis, and your premium can jump with each successive renewal. Still, for the folks who need it, guaranteed renewability is a godsend.

You can convert a term policy to a permanent one. 

Even though term life insurance is the only type most of us need, there are some cases where permanent can make sense. If you start out with a term policy, but end up needing permanent coverage — to secure care for a disabled family member, say, or to offset estate tax for your heirs if you become wealthy — convertibility can be a valuable feature to have.
Similar to guaranteed renewability, the important thing here is that you can extend coverage (in this case, for the rest of your life) without having to take a new medical exam. If you’re in good health, you probably won’t ever use the option because you can qualify for a better rate on a brand-new permanent life policy. But if you’re sick, converting your existing policy could be the only way to keep your coverage in force for as long as you need it.
While all my top picks will let you convert during the first part of your term, most take the option away at some point. Among my top picks, only TIAA and New York Life allow conversion at any time during the term, another reason they lead the pack.

And, it’s easy to customize your coverage.

Since everyone’s life insurance needs are different (and can change over time), the best policies allow a high degree of flexibility in your coverage, whether standard or as a rider.
  • Cost certainty — The option for a Guaranteed Level Premium is nearly standard across term policies. The option ensures that your premium won’t rise — it’ll be the same every year of your term. Level premiums make it easy to budget, and therefore easier to keep your coverage in force since you know what you’ll owe. (That said, you do pay more in the early years compared to a policy without level premiums to offset the increasing costs of insuring you as you age.)
  • Lots of options for term lengths — Most companies offer multiple term options: 10-, 15-, 20-, 25-, and 30-year terms are common. But it’s rare to find a policy as flexible as New York Life’s; it lets you select a term that’s any number of years long from 10 to 20 years. And even though New York Life doesn’t technically offer terms longer than 20 years, the “Policy Purchase Option” allows you to start a new replacement term at specific dates without another medical exam. So, you can buy an initial term of 20 years, have a surprise baby in year 12, and replace the existing policy with a new 18-year term policy (or 19, or 20). In effect, that’d be like buying a 30-year policy, except for the fact that you’ll be older when you buy the second term, so your premiums might be higher. However, those same premiums would be based on the medical data from your first policy, which could save you significant money compared to buying a brand-new policy.
  • Few, if any, conversion restrictions — I mentioned that some companies only allow conversion during the first part of the term, so if you wind up wanting to convert in the latter half of your policy, you could be out of luck. A big reason why I like TIAA Life insurance is that in addition to allowing you to convert at any time, it also lets you convert a term policy to any of its permanent products, not just the one or two it likes best (read: the more expensive ones).
  • Disability protection — If you become disabled during your term, a Waiver of Premium Rider will forgive your premiums and keep your policy in force. While it won’t replace lost income (like disability insurance), it will at least keep your life insurance from lapsing if you can’t pay for it.
  • End-of-life care — An Accelerated Death Benefit Rider lets you draw on your policy’s death benefit to help cover end-of-life costs. It can help pay for a potentially lifesaving treatment, or ease the financial burden of hospice care, making an extremely difficult situation a little bit more manageable. Keep in mind, though, if you elect to use this option, it’ll be deducted from your death benefit.
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