When shopping for life insurance, it seems that most people just look at getting the lowest possible rates for the most amount of coverage. There is nothing wrong with that. But why do some companies charge more or much more for what seems the same plan? And if rates are not the same for the same plans with all companies, why do some people want to pay more for the “same” coverage? Are they just not interested in saving money on their life insurance? Do they know something you do not know? Here are some possible reason.
If you are considering a term life insurance plan, then you should also consider the convertibility option. This option simply allows you to convert you term plan to a permanent life insurance without having to go through more medical underwriting. This is important as even though you may feel that term is all you need or can afford today, in 10 years or more, as your health or needs may change, convertibility may be the most important aspect of your policy. If your policy is not convertible, you may lose your coverage when you need it the most. In addition, the ability to convert your policy is not the only important part of this option. What can your policy be converted to? You need to make sure that your term life plan is convertible to a high quality permanent insurance plan. Many companies offer great whole life and universal life options to convert to. Unless, you are absolutely certain that you will only need your plan for a term period (as with some business loans) make sure to request more information on convertibility.
Term Guarantee Period
With term life insurance, you must make check that your rates are guaranteed for the full period. In other words, a ten year terms may be cheaper with company A than company B but company A may have the option to raise rates at some point before the 10 year is over while company B will guarantee rates for the full 10 years. What may have started as the cheapest rate may end up the most expensive.
Customer Service from the Insurance Company and the Agent
We feel that customer service is of prime importance. You need a company that will keep in touch with you regularly and inform you of new programs that may benefit you. They also need to inform you about your policy. Most people get a life insurance plan and file it away and if you would later ask them about the plan they have they either would say that they have no idea or worst, they think they know but are incorrect. A good company will be easily reachable and answer your questions in a simple manner and tell you about your present plan and possible options available.
You may not need them today but who knows what your needs will be tomorrow. Riders can be important from the start or at some point in the future. Make sure that you are ware of which riders are available and whether or not they can be added later. Some may include:
- Guarantee Insurability Rider (allows you to add insurance later with no or limited underwriting)
- Waiver of Premiums Rider (pays your premiums in case of disability – read definition carefully)
- Inflation Rider (adjusts or allows you to adjust your policy face amount based on a percentage you pre-select)
- Disability Income Rider (pays you a disability benefit in case of a covered disability – read definition carefully)
- Spouse Rider (allows you to add a spouse to your policy – this may be an inexpensive way to cover a spouse)
- Child Rider (allows you to add a child to your policy – maximum age is usually 21 to 25)
- Return of Premiums Rider (returns some or all of the premiums you paid to the insurance company)
- Accident Rider (pays a benefit in case of accidental death)
Value Added Benefits
Value added benefits that are often free can give your extra protection, discount on products you are already using or even such things as scholarships for children and grandchildren. If you are already paying for some of these benefits with other companies then you can save money as your new life insurance will give them to you for free. When buying certain products or using certain services, with some life insurance policies, these products or services can be greatly discounted. In the end, look at the added benefits some companies are just giving you and see if this “more” expensive insurance plan is actually cheaper for you to have.
Other things to consider
- Cost to have a policy mailed
- Cost to get a loan on your policy (if you have a cash value policy)
- Interest rate charged on loan
- Effect of loans or withdrawal on the death benefit
- Cash value growth
- Agent availability
- Customer service agent availability
- Company financial rating
- What other plans besides life insurance do they or they agent offer? – This may be helpful later when you need other coverage and do not want to have to deal with a whole new set of people.
We hope this article has helped you understand why price really is not everything. Sometimes when you think you are saving on premiums, you are actually postponing much higher costs in time and money later. We are always happy to hear from you. Your suggestions and questions are most welcome. Be well!