The answer to this depends upon the type of policy you need. Let’s be honest, most people don’t want or need to speak with their insurance companies on a regular basis. The most important feature of a life insurance company is being financially able and willing to provide the protection guaranteed in the life insurance contract if the need to file a claim should arise.
The cost of insurance is an obvious factor in choosing where to buy a life insurance policy. This is why Life Ant will compare life insurance quotes, and this is what our clients are largely interested in. In addition cost considerations though, financial soundness of the company and customer service are two surprisingly important (to some) considerations. Here’s why they are important for you to be aware of.
Life Insurance Companies Do Go Bankrupt
Even though there are laws governing the amount of money a life insurance company must keep in reserve (in liquid cash assets) small insurance companies do fail from time to time. Defaults in the life insurance industry are more common than many people realize, because small company defaults rarely if ever make headlines.
You May Need More Customer Service Than You Think
While customer service is not the first consideration of many mulling their life insurance options, over the course of owning a permanent life insurance policy more than 50% of people will take loans or withdrawals from their policies. People also make beneficiary changes, need tax documents sent to them, and have questions regarding payments. This isn’t even to mention the claims process. The purpose of life insurance is to provide a very necessary financial payout to beneficiaries when they file a claim. Choosing a life insurance company that will make the claims process easy for beneficiaries will go a long way to improving their quality of life in the immediate aftermath of a death.
Dalbar Service Rankings For All Major Companies
The need for strong customer service is part of the reason that we suggest using major well known insurance companies. While not equal amongst all, the customer service experience is generally very positive at all major companies. Dalbar, a company that develops standards and compiles service rankings for major financial institutions lists their rankings of service for the life insurance industry here. The quality of customer service should be one component of your decision making process along with costs and financial strength of the company.
Why Strong Company Financials Are Important To You
The financial soundness of a company becomes much more important to people seeking permanent forms of life insurance than those seeking term life insurance. This is because term life insurance does not have a cash value, is only going to be in force for a portion of a person’s life, and if a company goes bankrupt it is easy to find another term life insurance policy.
Contrast that to a whole life policy which is intended to be in force for the rest of a person’s life, and whose investment value depends in part upon dividend rates paid by the company. That’s not to say that financial soundness is not important for someone in the market for term insurance, it just becomes even more valuable for a whole life insurance owner. Every owner of life insurance needs for the insurance benefit to be readily available for the beneficiaries if there is a death claim filed, regardless of which type of policy they own.
Dividend Payment Depends On Company Performance
Don’t forget that whole life insurance policies pay dividends. The size of the dividend payment made depends directly on the financial performance of the company. By using companies with strong financial health, you are improving the odds that the company will perform well. High company performance directly benefits your finances.
States Do Provide Limited Guarantees
If you are in the market for a policy with a relatively small death benefit ( < $300,000), you should be aware that every state in the United States has a guaranty association protecting death benefits in the case of life insurance insolvency. To review specific rules for each state look at our state guide here.
Rating Agencies Determine Financial Strength
The big insurance companies have been in business for a long time, and have weathered every economic condition. To provide additional peace of mind, life insurance companies are provided a financial rating by credit ratings agencies. A.M. Best specializes in the insurance industry, and their ratings are often look at as the standard. Other ratings agencies such as Moody’s and Standard and Poor’s Ratings also provide financial ratings.
Compare Quotes but Keep Service and Financial Health in Mind
We recommend that you always consult with rating agency rankings and only purchase life insurance policies from companies who have achieved a strong investment grade ranking. We recommend that when you are comparing quotes to find the least expensive policy, look at Dalbar and A.M. Best ratings for your top few choices and use this information in conjunction with price to make your purchasing decision.