comparing life insurance can be like apples and orangesThe old saying is you can’t compare apples and oranges.  But what if you had to?  Those two fruits are a lot more similar than many life insurance policies today!  Here are 6 questions to consider asking when you compare life insurance:

#1 How Long do I Need Coverage?

Do you need coverage for a specific period of time, or for your whole life?  Figuring out why you need the coverage will help you determine the optimum length.

Are you insuring your family for lost income?  Or are you insuring yourself for a debt (perhaps your mortgage or other loan)?  Term life insurance may be the best option for you in these cases, and most likely the least expensive.

Consider the financial resources your dependents might need in the future.  If you are looking to maximize retirement income, protect a special needs adult child or protect your estate a permanent policy may be the best fit for you.

Not sure, talk to your independent agent.  You may find a combination of coverage works best, some term and some permanent.  An independent agent can help you understand the different options and why one may be better than another for your situation.

#2 What Type of Coverage Do I Need?

How long you need coverage for will certainly affect your choice of type of insurance policy you purchase.

Term coverage is offered for different lengths of time, typically 5, 10, 15, 20 and sometimes 30 years. However, if you need a policy for 5 years, you will be surprised to find that a 10 year policy is probably less expensive.  This is because only a few companies sell 5 year term, but many more sell 10 year term.  Competition is the name of the game here.

Permanent Life Insurance is generally more expensive than Term but covers you for your entire lifetime. There are different kinds of permanent coverage.  Guarantees vary based on how the policy is structured.  You could have a permanent policy cover you up to age 85 or 90 or up to age 121.  Which length makes more sense for you will be based on several factors including your reasons for coverage and cost among others.

When you start to compare life insurance policies, the more information you give your agent, the more they can guide and assist you with these important decisions.

#3 Is the Company Financially Strong?

Two policies may look alike, but the companies which offer them may not have the same financial backing. How can you tell?

You can check some of the rating companies such as A.M. Best or Moody’s.  If you have trouble with that, you can always ask your industry expert, your independent life insurance agent.  They can explain why the financial ratings of the different insurance carriers matter.

#4 How Good are the Conversion Options?

A conversion option allows a Term Life insurance policy to be exchanged for a permanent policy without any underwriting.  The new policy has the same underwriting rating, but is priced based on your current age.  This option has a limited period of availability that differs from company to company.

Every carrier has different criteria for when you can exercise the conversion option as well as which permanent products you can convert to.  All permanent policies are not created equally, some have guarantees while others don’t.  This makes some conversion options much more attractive than others.  When you compare life insurance policies you may want to ask about the conversion products.  Your agent should know which companies generally have good ones!

This option can be very important if you later have a health condition which might make getting a new policy significantly more expensive, or if you become uninsurable, or simply realize you need insurance for the rest of your life.

#5 Does the Company Offer the New Critical Illness Benefits?

Recently, a few life insurance carriers have offered new benefit riders which allow you to withdraw a percentage of your life insurance benefit to meet medical or other needs during a terminal or critical illness. Although this rider is not a replacement for long term care coverage, it provides some additional security in times of critical illness.

As not all companies have these riders available, if this sounds like a benefit you want, let your agent know and they can give you pricing for these companies as well.

#6 Which Company is Likely to Give Me the Best Rating Based on My Health Condition and Medications?

The only way to know the answer for sure is to consult an independent life insurance agent who understands the ins and outs of different life insurance underwriting policies.  Every insurance carrier has slightly different underwriting guidelines.  Giving your independent agent all of the information you can will help them steer you to the carrier most likely to give you the most favorable rating.

The Bottom Line

There are so many options to consider when you compare life insurance policies that it makes sense to get help.  Let your independent life insurance agent be your guide to the best insurance at the best possible price.

Photo credit: TheBusyBrain