Just thinking about this can give you the heebie-jeebies.
There’s always something else-something more fun-to spend your time and money on than life insurance.
“The hardest thing about selling life insurance is getting people to focus on it,” says Ed Williams, a Farm Bureau Insurance agency manager in Waterford, Mich. “People don’t want to sit down and talk about how someday they will die.”
Some people don’t have to think about that. After all, not everyone needs life insurance.
How do you know whether you do? A simple test: Is there someone in your life who would suffer if your income were suddenly to disappear? If so, you probably need life insurance.
For most people who need life insurance, term insurance would probably be a better buy than whole life. As the name implies, term insurance is good for a certain time frame, usually a year, and is cheaper than whole life.
Whole life includes a savings element, but the savings usually grow at a low interest rate, and people who buy term can take the money they save and invest it in a mutual fund.
One criticism of term life insurance is that even though it starts out cheap, premiums increase each year as you get older.
For some people, permanent insurance may be the way to go. Whole life and universal are just two of a dizzying array of options that life insurance agents call “permanent” insurance because customers are urged to keep it forever.
Introduced in the 1980s, universal is really two types of life insurance. It combines term insurance (which simply pays a benefit when you die) with an investment account.
Earnings in a universal policy, and to a lesser extent in a whole life insurance policy, can vary. They depend upon the financial expertise of the companies handling the investments. The earnings build the policy’s cash value.
A major difference between the two types of policies: how customers pay their premiums. Whole life premiums are fixed. You pay the same amount every time. Universal premiums may vary.
But before buying a policy, shop around. It could save you hundreds of dollars in premiums.
Several companies will do the comparing for you, even enabling you to buy the insurance without an agent:
InsuranceQuote (800-972-1104), LifeQuote of America Inc. (800-521-7873), SelectQuote Insurance Services (800-932-2210) and TermQuote Services Inc. (800-444-8376) sell policies and offer free quotes.
For a comparison list of up to 150 life insurers sold by independent agents, call Quotesmith (800-556-9393). The $15 fee includes a report on the insurers’ financial stability.
Insurance Information Inc. (800-472-5800) charges $50 to locate the lowest policy from among approximately 550 insurers in its program. If it can’t save you at least $50 over your current policy, Insurance Information refunds its fee.
Two of the highest-rated companies that sell life insurance directly are Ameritas (800-552-3553) and USAA (800-531-8000). However, customers who decide to work without an agent should have a good understanding of the type and amount of insurance they need.
A low-commission life insurance broker such as Fee for Service (800-874-5662) is another option. Because this Tampa-based company is paid a flat marketing fee from the life insurance companies it sells, it has little incentive to sell expensive policies that are not suited to your needs.
Fee for Service also will refer you to a fee-only broker in your state who charges approximately $100 to $150 per hour for advice on how much and what kind of life insurance you need.
Wholesale Insurance Network (800-808-5810), a subsidiary of Fee for Service, represents 10 insurers who can sell everything from term to whole life directly to consumers. Consumers must know the type and amount of insurance needed.
If you have general questions about life insurance, contact the National Insurance Consumer Helpline (800-942-4242). Although it’s sponsored by the life, health, auto and homeowners’ insurance industries, proselytizing is kept to a minimum. What you get is basic answers to questions and free literature explaining various policies.
What if you’re trying to find a lost insurance policy?
Suppose a relative dies. You know the person had a life insurance policy, but you can’t find it and you don’t know which company sold the policy.
Write to the Missing Policy Search Service, American Council of Life Insurance, 1001 Pennsylvania Ave., N.W., Washington, D.C. 20004-2599. Ask for a policy search form.
After you return the form, the council will send it to about 100 of the largest life insurance companies for free. Expect the search to take about four months.
Checking the financial strength of a life insurance company is easy.
A.M. Best evaluates approximately 1,700 life insurance companies, ranking them from A++ (superior) to F (liquidation). Companies that receive a rating of B+ or better are considered “secure.”
Best’s ratings are available in most public libraries. Best offers its reports to the public for a fee. Call 900-555-2378. The charge is $2.95 per minute. First call 908-439-2200, ext. 5742 for the insurer’s ID number.
Weiss Research also sells its ratings to the public for $15 per company (800-289-9222). Of the 1,700 companies Weiss reviews, about nine have received its highest ranking (A+). Weiss has given a B+ or better to about 100 insurers, placing them on the company’s “recommended” list.
Other firms that rate insurance companies include:
Duff & Phelps (312-629-3833). Recommended ratings include AAA and AA+. Ratings are free by phone.
Moody’s (212-553-0377). Look for Aaa, Aa1, Aa2 or Aa3. Insurance rating quotes are free by phone.
Standard & Poor’s (212-208-1527). Consider companies with a AAA, AA+, AA, AA-, A or A-. Ratings for up to five insurance companies are free by phone.
To be safe, choose an insurer that is highly rated by at least two of these organizations.
