This Matters More Than Premiums When Choosing Life Insurance


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Buying life insurance can be complicated. Consumers need to choose between term vs. whole life coverage and make decisions about how large the death benefit should be. They also need to shop around among different insurers to find the right one.


When comparison shopping during the process of buying a policy, many people focus primarily or solely on the premiums. This is the monthly amount the policy owner will have to pay to keep coverage in effect. It definitely makes sense to ensure premiums are affordable because otherwise the policy could lapse if they aren’t paid.

But, while insurance buyers must make certain their life insurance coverage is within their budget, most people generally shouldn’t decide which insurer to work with based on price alone. That’s because there’s something even more important to look at.

This is the most crucial consideration when buying life insurance

When buying life insurance, the most important thing to think about is whether the insurer has a good reputation. Specifically, it’s important that the insurer is financially stable and that the company pays out claims in an efficient and timely manner without a lot of hassle.

See, life insurance policies pay out in times of tragedy. Surviving loved ones do not want to have to fight an insurer that has improperly denied a claim. They don’t want to have to jump through hoops to try to get paid from a state guaranty fund if the insurer has gone bankrupt and can’t pay out claims. And they don’t want to wait months and months while the bills pile up to get the money from an insurer that is slow to pay.

It is important to find an insurance company that is going to be financially solvent for the foreseeable future, and that will promptly pay out the money that surviving family members need to pay for funeral costs and cover other expenses that the deceased person’s income would normally have been used to pay for. That way, the insurer can provide the very crucial protection that the policy was purchased to offer in the first place.

How to find a life insurer with a good reputation for handling claims

Finding an insurer with a good reputation for claims handling is going to require a little research.

Checking AM Best Ratings can be a good idea, as AM Best is a credit rating agency that specializes in assessing insurers. A solid AM Best rating shows that the insurance company is likely to have the money to pay out claims that are made in the future.

J.D. Power also rates life insurance companies in terms of claims handling and customer service, so it can be a helpful resource to find out which insurers people are happy with and which ones have caused problems. And the National Association of Insurance Commissioners also maintains a database of complaints which it can be helpful to review.

Better Business Bureau data can also shed light on whether complaints have been made and how the insurer has responded. And the BBB website also has customer reviews as well as assigns a ranking of its own.

By taking the time to look into all of these resources, policyholders can ensure the life insurance coverage they purchase will be there to provide for loved ones when a death occurs.

The Ascent’s picks for best life insurance companies

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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