Things to Consider When Choosing a Life Insurance Company

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  • Post last modified:January 23, 2020

Life insurance is financial support that you pay to be received by your beneficiaries after your death. It can have different purposes, people may purchase it for a new house, a dream car or education of children.

However, it depends on your needs and requirements. It is a commitment that is done to gain benefits for the loved ones after your death.

You will find a variety of reasons why you may need life insurance. Anyone with the desire to keep the financial balance for their loved ones will need a life insurance policy.

It just has to serve the exact purpose and to ensure it – you must choose the company only after researching it properly.

Don’t forget to check out our checklist for buying life insurance.

Why Be Careful While Choosing a Life Insurance Company?

Life is changing. We are entering into a different lifestyle with innovations and technology. Every business claims to be perfect and says that it is up to your benefits too.

So, sometimes it is hard to make a decision when you have a pool of online companies claiming to provide the best life insurance. You might have checked out the best ones, but making sure that you are making the right choice is another thing.

Therefore, choosing a life insurance company is more complex than choosing a policy for it.

Any person needs to understand the core value of the decision while choosing the company before finalizing the policy. It may require you to understand many aspects of life insurance.

So, let’s dig it down further and understand every aspect and all the factors of choosing the company. As it is better to be a little late than taking a wrong turn.

Know All Aspects of Life Insurance Company

Many people choose companies by filtering them over the price. It is essential as you are going to manage your budget accordingly.

But still, it requires more research and consideration of many factors to be sure that you are making a good choice.

Mainly, you should know about:

  • The types of policies they offer
  • Financial security of a company
  • Coverage
  • Customer service
  • Market competitiveness
  • Background of the company
  • Variety of products
  • Prices

Remember, satisfaction only comes from the right decisions made at the right time. To make these accurate and precise decisions about your life, you need to be analytical.

No, it is not rocket science if you care for your family. You don’t want to have trouble claiming life insurance.  So, while you are fixing their finances by supporting them, you must ease the process of claiming it too.

Any company can claim to be an ideal policymaker. Here come your requirements, you must know your requirements.

Write down the needs, make your policy after gathering some basic information and then reach out to more than three companies.

Listing more than three companies will help you choose the most suitable one. So, it a good thing to have multiple options and consider each of them before making a final deal.

You must consider all the common and uncommon factors while choosing the company. People who think that only policy or plan should be solid are wrong. The company and its reputation are also important because in the end, if the company fails, it will be the worst situation for you.

Now, before you get confused, we have some more details about life insurance as well.

So, before jumping to the factors, you may need to be clear about a few more things or just know about them to avoid any wrong policy from the bad policy seller.

Approaching companies without any information or base knowledge can lead you into a dire situation. If you want to avoid that, discuss with someone who has already purchased any insurance policy.

Research and understand life insurance, its advantages and most important the types of life insurance.

Common Types of Life Insurance

Life insurance is not limited to the death benefits. It is serving many different purposes for the people. For example, if you have kids, you might be worried about their higher education. An educational life insurance policy can help you save for a better future.

You will approach the agent and he will offer you all kinds of policies. The confusion arises from this point and they put every effort to convince you to make a purchase right at the moment.

And it ends up being the worst decision of your life. You might buy the policy that is worthless in every way and offer no benefits to your or your family.

To reduce this confusion, understand all the types of life insurance before you reach out to the company.

Term Life Insurance

The simplest type as it ends with the specific term. If you die before the expiration of the term, the committed amount is paid to your beneficiary.

Simplified Issue Life Insurance

Every insurance policy requires a medical exam other than simplified issue life insurance. It has the one exemption in the policy and that is no medical exam.

Final Expense Insurance

Want to cover your funeral expenses? Many people don’t want to put that burden on anyone. So, for them, there is final expense insurance.

Group Life Insurance

It is not a private type. Group life insurance is purchased by the employees to cover their employees and offer them benefits.

Whole Life Insurance

It is an expensive type of policy. The benefit is that it caters to the bigger needs e.g. estates or inheritances. Also, it is permanent life insurance with cash value.

Universal Life Insurance

It same as whole life insurance, but the policyholder of universal life insurance can change the amount of death benefits and premium any time.

Variable Life Insurance

It also differs from the whole life insurance at one point where the amount of the insurance goes to the mutual funds or you can say sub-accounts. Profit and loss are dependent on the market. So, it can be more like an investment plan.

Variable Universal Life Insurance

The name says it all. Yes, you can set change the premiums and amount of death benefits and also invest in mutual funds at the same time.

Guaranteed Issue Life Insurance

It goes a step further and exempts you from answering any questions regarding your health. All you need is to pay premiums on time.

Factors to Consider While Choosing a Life Insurance Company

You know all the types of life insurance and also clear about your needs and demands.

The next step is to find a company that is offering the best prices along with many other factors while choosing the company.

The following are the few common considerations to keep in mind while listing out the top companies.

Third-Party Ratings

The financial stability of any company is necessary. It is determined by the third-party institutes to tell the financial strength of any insurance company. The rating is evaluated through a company’s profile and balance sheet.

Institutes like Fitch, AM Best and Comdex are the ones to tell you about the financial stability of any insurance company.

You must know that these ratings are important for any company to maintain its reputation. So, check out all the ratings and see if there are any negative claims against the company.

Agencies have a right to upgrade ratings any day, so always check the rating before a final decision.

Company Reserves

Next is to know about the company reserves. Every insurance company keeps the reserve aside from every dollar you pay as a premium. They do it to balance the cash within the organization.

These reserves help them to pay the debts in case they lose too much in investment or claims against them. So, the more money they reserve will ensure that they will not damage you during their financial crisis.

Overall, it determines the ability of a company to pay in the crisis. However, regulations for the reserve vary as per the state. Just keep the information to protect yourself for the future.

Conversions and Benefits

Now, that you know the different types of policies. You also need to know about the company’s conversion policy and other privileges. Try to know as much as you can.

Agents can hide some of the specific information for their benefit, but stay uptight and never ignore any aspect of the policy.

Either you are purchasing a term policy or universal life insurance, ask them questions about premiums, cash value, investments and everything that defines the particular type of policy.

Flexible Products

Another factor for choosing any company for life insurance is its flexible choices in the products. Lifestyle has a huge impact on this factor as it demands changes in policy as well.

With the changing lifestyles, profession, and medical conditions – a company should be flexible enough to offer the transition from one type of policy to another.

Also, make sure that your company has a renewable policy and provide easily convertible insurance. It is important because life is not always the same and any change in plans needs to change the policy plan too.

Captive or Non-Captive Agents

Learn about the captive and non-captive agents. Captives solely work for the one company and regardless of the customer demands; they are bound to sell the policy that benefits their company.

Non-captive agents are individuals who are also known as a broker. They can provide you with a comparison between other company’s policies too.

So, always ask a company if they allow these agents to be non-captive and unbiased or not.

Competitive Rates

The most important part is to know about the rates of the policies. It has to be market competitive and to know the rates form the market, always reach out to more than one company.

Make a list, know their rates and then decide the policy you need basing on the best rates. Compare the rates between different companies, so you will make an informed and wise decision by the end of the day.

This is especially important for seniors. For example, there few companies that give life insurance to seniors above 85. As this policy is rare, insurers can overcharge if not compared with others.

All these factors are important, you might have some of the other in mind too. But make sure you get as much information as you can.


Life insurance is the policy to protect you and your loved ones. A little negligence in gathering the information can ruin a lot of things along with the hopes you set with the policy.

So, ratings, paying ability, rates flexibility and privileges must be known to take a wise and informed decision regarding the policy.

Linda Chavez

I'm a burial & senior life insurance expert, independent agent, Founder & CEO of Seniors Life Insurance Finder. I have been working in this sector since 2004 and established my own company in 2014. I have a team of seven members, and we are trying hard to share the knowledge we've gathered. We know how difficult often it is to find an affordable policy. Hence, we are doing our best to help you.