Approximately 1,000 life insurance companies are selling life insurance in the United States. However, many of these companies are part of larger groups and are not competing with one another. A group can have separate companies to distribute its products to meet specific state regulations or achieve other organizational goals. There are approximately three hundred group companies.
Only some groups can operate in some states. It would help if you always bought from an insurance company licensed in your state. This will allow you to rely on the state’s insurance department for assistance if you have any problems. If the insurance company goes under, your state’s insurance guaranty funds will only help policyholders from licensed companies. Contact the state insurance department to find out which companies have been licensed in your state.
When choosing a life insurance company, there are many other things to consider.
- Product Most companies offer a wide range of policies and features. Make sure you choose the company with the product and features that best suit your needs.
- Identity Life insurance company names need to be clarified. Different companies may have the same names. Many life insurance company names include words that indicate financial strength (such as guaranty, reserve, security), financial sophistication (such as Bankers, Financial, Investors), maturity, dependability (such as Assurance, Reliable, and Trust), fairness, such as Beneficial or Equitable, Peoples), breadth (such Continental, National, International), government (such a Republic, Capital, Republic), well-respected Americans (such, e.g., Franklin, Jefferson, or Lincoln). Make sure to know the name, address, and affiliation of any company you are interested in (click here for an example).
- Financial Security – Life insurance is a long-term agreement. Life insurance policyholders do not have the same guarantee as those who hold bank accounts through the Federal Deposit Insurance Corporation. Use ratings from independent rating agencies to find a company that will be financially sound for many decades.
- Market ethics Some life insurance companies subscribe to the principles and codes for conduct of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical behavior in life insurance marketing.
- Service and advice Life insurance can be confusing and complex for many people. Having a representative who you can talk to and be attentive to all your concerns. This could be related to choosing a life insurance agency. Some agents only represent one or very few life insurance providers. Learn How to select a life insurer agent
- Claims You should look at a national claims database for information about a company. Your state insurance department can also tell you if there have been any customer complaints about the service and the number of policies sold by the insurance company.
- Premium cost: The company pays the entire life insurance contract premium. The premium for a specific type of insurance (e.g., term life) and a death benefit can differ between companies. Companies have different features or charge more for the same coverage. The first step to comparing insurance policies is to compare similar plans based on the following:
- Your age
- – Type of policy and policy features
- – The amount you’re purchasing in insurance
The cost of insurance protection is different from the premium. A policy may have a higher premium but offer more benefits (e.g., policy dividends). Both policies might promise tips but at different times and in different amounts. The higher premium policy may have a lower cost for protection in each case. How do you determine the price of a policy? The Net Payment Cost Index of a policy and its Surrender Cost Index should be disclosed by companies. The Surrender Cost Index is best if you are only planning to keep the insurance for a limited time. The Net Payment Cost Index is better if the policy is retained indefinitely. The cost index is generally lower than the premium.