What the best life insurance has

  • Strong financial ratings. Even a well-known insurance company may be financially weak or have unsatisfied customers. To find the strongest, most reliable life insurance companies, look at their financial-strength ratings (as reported by the five major rating agencies: Standard & Poor's, Moody's, Weiss, Fitch Ratings and A.M. Best) and check for customer complaints (at the Better Business Bureau, the National Association of Insurance Commissioners and other sources).
  • A long history. A life insurance company that has been around for a while is more likely to still be around when you need them. There is no agency comparable to the FDIC for protection if your insurance company were to go out of business. If you have term insurance, your coverage would stop and you would no longer have to pay premiums; however, if you are quite a bit older than when you originally obtained the policy, or are no longer in as good health, your premiums would go up at a new company for a comparable policy.

Know before you go

A general idea of what you will pay. Getting a range of quotes from a life insurance quote site such as LifeQuotes.com will give you an idea of the range of prices that you can expect to pay. If you go for a specific quote and it's much higher or lower, ask why.

How much life insurance you need. Don't let your insurance company oversell you. The chances that your loved ones will actually need to collect are slim. Don't pay more than you need to.

Your health and lifestyle risks. A young, healthy person will have the lowest life insurance premiums, and if you buy them then, the cost won't go up. Your premiums will increase if you are obese, have ongoing health conditions, smoke or have a high-risk job or lifestyle. Improving your health and making adjustments to any high-risk behaviors will lower your premiums.

That term life is the way to go. Life insurance sales people are well-trained and can make "investment" packages that include whole life (also called universal life, variable life and permanent life) insurance policies sound very attractive. They make a lot of money, but these policies don't pay off as well for you. Experts agree: Get a term life policy and put the money you save from lower premiums in bonds, a 401(k) or other higher-yield investments. Whole life policies are suitable for a very small segment of the insurance population, and you'll know if you're one of them.

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