Term life insurance is more accessible than it ever has been before. It offers affordably low premiums and maximum coverage, and it is widely available to those in good health. Most leading financial advisers recommend term life coverage to working-age individuals who have incomes that spouses and/or dependents rely upon for current and future living expenses.
So how does life insurance work? In short, policy-holders choose a coverage amount and term length – often between 10 and 30 years. Premiums are determined based on the health of the insured at the time of purchase, as well as age, lifestyle habits and coverage amounts. Premiums are fixed for the term, and if a claim needs to be made before the policy’s expiration, the insurance company pays coverage benefits directly to named policy beneficiaries.
Choosing an Insurance Company
Many consumers select term life plans based solely on the term life insurance quotes supplied to them by insurers competing for business. They study how to get the cheapest term life insurance policy available, and shop multiple insurers for the lowest rates. However, choosing between term life insurance companies is about more than shopping the lowest rates for comparable coverage.
The lowest premiums may save money up front, but if those rates are associated with a volatile company, policy-holders may lose valuable coverage (and premiums) if the insurer becomes insolvent. Several companies help hold insurers accountable, providing the public with easy-to-read rankings that help choose policies from insurers deemed most dependable.
For example, Standard and Poor’s (S&P) insurance ratings are determined by a team of financial analysts who carefully evaluate the fiscal health and long term outlook for America’s leading life insurance providers. Insurers are rated on a lettered scale, with AAA recognizing companies with exceptional stability and outstanding financial footing. At the opposite end of the scale, companies with C ratings are marked as failing and may be insolvent or otherwise on unstable financial ground. Typically, an AAA or AA rating is preferential, whereas an A rating could be considered average. Insurers with ratings below A may not be the safest choice in the long term. Other independent insurance evaluators include Fitch, Moody’s and A.M. Best – all of which have similar rating systems to Standard and Poor’s.
The most dependable life insurance companies are typically those with excellent independent ratings, as well as high marks from existing customers. An insurer with low customer satisfaction may be difficult to work with should you need to file a claim. Although an insurer’s financial condition and customer service can change over time, there are some insurers that you can feel especially confident purchasing a policy from:
Metlife has a long history of providing life insurance to Americans. It began in 1868 – just three years following the end of the Civil War. Today, the company provides insurance policies throughout the U.S. and around the world in Asia, Latin America and Europe. Metlife has an S&P rating of AA- and was verified in stable condition as of 2012. Metlife also ranks high in customer satisfaction, ranked 4 out of a possible 5 stars for customer service and overall value in a survey conducted by Insure.com.
4. State Farm
State Farm may be best known for its auto and home insurance products, but it is also one of the most stable term life insurance companies in America. The company began selling life insurance products in 1929 and now serves nearly 8 million policy-holders throughout the U.S. State Farm carries an AA rating by S&P and was confirmed as stable in 2011.
Occidental Life Insurance Companywas founded more than a century ago and eventually became known as Transamerica in 1930. Today, it maintains high rankings from leading rating services, such as S&P, Fitch, Moody’s and A.M Best. As of 2011, Transamerica Life Insurance Company was confirmed as stable by S&P, and it maintains a ranking of AA- at both S&P and Fitch. The company also performed well in Insure.com’s customer satisfaction survey, scoring 4.5 stars in overall value.
2. New York Life
New York Life has been around since 1845, weathering the great depression and the Civil War, and eventually emerging from the recent recession on stronger financial footing than it ever has been on before. New York Life maintains an AA+ ranking from Standard and Poor’s, and in February 2013, Fitch gave it a highly-coveted stable rating of AAA. It was ranked fourth overall in Insure.com’s customer satisfaction survey, with 4-star ratings in customer service and overall value.
1. Northwestern Mutual Life Insurance Company
Northwestern Mutual Life Insurance Company is strong both financially and in customer satisfaction. The company ended 2012 with a surplus of nearly $20 billion, and it projects a record-setting year for 2013. The company is scored with the highest possible rankings from Moody’s, Fitch and A.M. Best, and it also holds an AA+ rating with Standard and Poor’s. Northwestern Mutual Life barely edges out New York Life among customer satisfaction ratings, but still maintains an overall 4-star rating among those surveyed by Insure.com.
While some may suggest that you find the lowest life insurance rate available, I’d encourage you to take a few more factors into consideration and ratings/stability should be atop that list. Instead of simply searching for the cheapest rate, shop around between the best term life insurance companies and then choose the lowest rate among that group.
Readers: when you purchased life insurance, did you just look for the best rate or did you take other things into consideration such as the ratings and stability of each of the companies?
The articles are written by personal finance enthusiasts (not certified professionals) based on their personal experience. What works for them may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
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