The most important feature of any life insurance company is its ability to pay its obligations. The company you choose must have the stability and financial strength to survive for the many years your policy will remain in force. Ratings of the financial strengths of insurance companies are available from A.M. Best Company (www .ambest.com) and Standard & Poor’s (www.standardandpoors.com).
You Can Easily Buy Life Insurance Online
You Can Easily Buy Life Insurance Online
Smart personal financial managers take a do-it-yourself approach to life insurance. They regularly calculate their needs and decide what types of insurance to buy and cancel in what increments. This allows them to use a premium quote service that offers computer-generated comparisons among 20 to 80 different companies. Premium quote services can be found at www .quotesmith.com, www.quotescout.com, and www.accuquote.com. These websites also offer online life insurance needs calculators and a wealth of information on life insurance from an unbiased perspective. In addition, all the major life insurance companies have an online purchase system. Term insurance is easiest to buy this way, but even cashvalue insurance can be purchased online.
Or You Can Use a Local Insurance Agent
An insurance agent is a representative of an insurance company authorized to sell, modify, service, and terminate insurance contracts. In the United States, life insurance is typically sold through exclusive agents who represent only one company, although some independent agents represent more than one company.
The life insurance agent must be qualified to design a program tailored to your specific needs and should understand the dynamics of family relationships, which influence all life insurance needs. The agent should have earned a professional designation, such as chartered life underwriter (CLU). To earn the CLU, an agent must have three years of experience and pass a ten-course program in life insurance counseling. Some agents also may have earned the certified financial planner (CFP) or chartered financial consultant (ChFC) designation Your agent should be willing to take the time to provide personal service and to answer all of your questions about the policy both before and after you purchase it. Always ask an agent about the first-year commission on any policies you are considering. In addition, you should check your agent’s reputation with your state’s insurance and securities investment regulatory agencies
Compare Costs Among Policies The price people pay
for life insurance depends on their age, health, and lifestyle. Age is important, of course, because the probability of dying increases with age. A person who has a health problem such as heart disease or diabetes may pay considerably higher rates for life insurance or may not be able to obtain coverage at any price. People with hazardous occupations (police officers) or dangerous hobbies (skydivers) are often required to pay higher life insurance premiums as well. Life insurance companies typically offer their lowest prices to “preferred” applicants whose health status and lifestyle (for example, nonsmokers) suggest longevity. “Standard” and “impaired” applicants would pay more. Because companies differ in how they
Popular magazines such as Kiplinger’s Personal Finance Magazine, Consumer Reports, and Money regularly publish articles that give average or typical premiums for different types of policies. In addition, your state department of insurance may publish life insurance buyer’s guides containing price guidelines that may prove useful in selecting companies with the lowest prices. These independent life insurance agents or groups of agents concentrate on marketing term life insurance at the lowest possible rates. Term life insurance premiums are usually quoted in dollars per $1000 of coverage. Generally, the higher the face amount of the policy, the lower the rate per $1000. For example, a company might sell term life insurance for $1 per $1000 per year when purchased in face amounts of $100,000 or more and for $1.25 per $1000 per year for policies of less than $100,000. Policies with face amounts of $1 million can cost less than $0.50 per $1000 per year for people younger than age 35.
It is easy to pay too much for term life insurance, especially if you do not comparison shop. The rates shown in Table 12.4 represent good values for term insurance. Note that smokers pay much higher premiums than nonsmokers because as a group smokers die ten years earlier than nonsmokers. Men pay more than women because they typically die three years earlier. Table 12.5 lists annual premiums that are near the average required for various types of insurance policies.
Or You Can Use a Local Insurance Agent
An insurance agent is a representative of an insurance company authorized to sell, modify, service, and terminate insurance contracts. In the United States, life insurance is typically sold through exclusive agents who represent only one company, although some independent agents represent more than one company.
The life insurance agent must be qualified to design a program tailored to your specific needs and should understand the dynamics of family relationships, which influence all life insurance needs. The agent should have earned a professional designation, such as chartered life underwriter (CLU). To earn the CLU, an agent must have three years of experience and pass a ten-course program in life insurance counseling. Some agents also may have earned the certified financial planner (CFP) or chartered financial consultant (ChFC) designation Your agent should be willing to take the time to provide personal service and to answer all of your questions about the policy both before and after you purchase it. Always ask an agent about the first-year commission on any policies you are considering. In addition, you should check your agent’s reputation with your state’s insurance and securities investment regulatory agencies
Compare Costs Among Policies The price people pay
for life insurance depends on their age, health, and lifestyle. Age is important, of course, because the probability of dying increases with age. A person who has a health problem such as heart disease or diabetes may pay considerably higher rates for life insurance or may not be able to obtain coverage at any price. People with hazardous occupations (police officers) or dangerous hobbies (skydivers) are often required to pay higher life insurance premiums as well. Life insurance companies typically offer their lowest prices to “preferred” applicants whose health status and lifestyle (for example, nonsmokers) suggest longevity. “Standard” and “impaired” applicants would pay more. Because companies differ in how they
Popular magazines such as Kiplinger’s Personal Finance Magazine, Consumer Reports, and Money regularly publish articles that give average or typical premiums for different types of policies. In addition, your state department of insurance may publish life insurance buyer’s guides containing price guidelines that may prove useful in selecting companies with the lowest prices. These independent life insurance agents or groups of agents concentrate on marketing term life insurance at the lowest possible rates. Term life insurance premiums are usually quoted in dollars per $1000 of coverage. Generally, the higher the face amount of the policy, the lower the rate per $1000. For example, a company might sell term life insurance for $1 per $1000 per year when purchased in face amounts of $100,000 or more and for $1.25 per $1000 per year for policies of less than $100,000. Policies with face amounts of $1 million can cost less than $0.50 per $1000 per year for people younger than age 35.
It is easy to pay too much for term life insurance, especially if you do not comparison shop. The rates shown in Table 12.4 represent good values for term insurance. Note that smokers pay much higher premiums than nonsmokers because as a group smokers die ten years earlier than nonsmokers. Men pay more than women because they typically die three years earlier. Table 12.5 lists annual premiums that are near the average required for various types of insurance policies.
The cost of insurance measured in dollars per $1000 is not an appropriate decision criterion when attempting to compare term with cash-value insurance or when examining different types of cash-value insurance. Three methods are used to compare similar policies:
- Net cost method. The net cost of a life insurance policy equals the total of all premiums to be paid minus any accumulated cash value and accrued dividends. It is calculated for a specific point in time during the life of the policy for example, at the end of the 10th or 20th year. The net cost is often a negative figure, giving a false impression that the policy will pay for itself. You should ignore net cost calculations provided by a life insurance agent.
- Interest-adjusted cost index method. A cost index is a numerical method used to compare the costs of similar plans of life insurance. The interestadjusted cost index (IACI) measures the cost of life insurance, taking into account the interest that would have been earned had the premiums been invested rather than used to buy insurance. The lower the IACI, the lower the cost of the policy. Ask for 5-, 10-, 20-, and 30-year IACI values as well because companies have been known to manipulate their dividend and cash-value accumulations to look especially good at the 20-year point. You should insist on being told the index before you agree to buy a policy, and you should shop elsewhere if the agent refuses, resists, or implies that the index has little value.
- Interest-adjusted net payment index method. The IACI assumes that the policy will be cashed in and surrendered at the end of a certain period (usually 20 years) rather than remaining in force until the death of the insured. If the policy will remain in force until death, you can use the interest-adjusted net payment index (IANPI) to effectively measure the cost of cash-value insurance. The lower the IANPI, the lower the cost of the policy.
.
0 comments:
Post a Comment