Comparing term life insurance policies
With its simplicity and affordability, term life insurance can be part of a smart plan to get the coverage your family needs. But with many life insurance companies offering similar term life insurance products, what should you consider when comparing policies to find the one that's best for you?
Consider the following when comparing term life insurance policies:
The carrier's financial strength and reputation
Picking a company with a strong financial rating is a good way for you to filter through your selection of policies. Although cost can often be a prime determining factor, you should consider selecting a solid life insurance company that will be there for you when you need it. Start by looking at the company's financial rating, which provides an indication of the carrier's ability to meet its obligations to its insureds. Depending on the rating, you can immediately get an idea of how financially sound they are. Also, do some additional research online to see what other customers are saying about their experience with the carrier. When looking through client reviews, focus on customer service, product satisfaction, and claims processing speeds.
The conversion privilege
Many term policies can be converted to cash value policies under certain conditions if they contain a conversion privilege. Conversion simply means that your term policy can be exchanged for permanent* life insurance of equal or lower face amount, typically without any underwriting or medical exam. For example, if you have a $50,000 convertible term policy, you could convert it into a $50,000 permanent life policy without providing health history. Because conversion provisions vary considerably, you should carefully read the conversion clause of any term policy you consider buying.
Policy riders/endorsements
Depending on the life insurance company, each term life policy will typically have a variety of add-on coverages, commonly known as policy riders or endorsements. Riders can give additional benefits to your term policy and enhance your coverage. Available riders vary by insurance company and policy, as do the rules for how they work and when they can be purchased. Costs also vary and depend on the type of rider being purchased. Some common riders include: accelerated death benefit rider, accidental death benefit rider, guaranteed insurability and disability riders. Select riders based on your needs, because you may not find all of them to be worth the additional cost.
Cost
When it comes to budgeting for life insurance, affordability is an important determining factor. Naturally, the premium for a five-year policy will be less than that for a 30-year policy, so it's important when comparing policies that you're comparing apples to apples.
* As long as required premium payments are timely made.
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