Differences between Companies and Products

The following is a brief list of some of the other factors that we need to consider when comparing products and companies:

Company Financial Strength: An insurance policy is a contract between the insured and the insurer. As long as premiums are paid, the contract is “in force”. Contracts can be in force for a long time and an insurer’s ability to pay out according to the contract is at question. Not all life insurance companies are the same. Some are very large financially, some are small. Some companies are in better financial condition than others. The longer the level term period, the more important it is to consider how healthy and strong the life insurance company is. An independent analysis of an insurance company’s FSR or Financial Strength Ratio is provided to the insurance industry by A.M. Best. This rating is an opinion about an insurer’s ability to meet its ongoing insurance policy and contract obligations. (See A.M. Best’s Financial Strength Rating (FSR) Scale, below)

Premium Guarantees: Are the premiums for the policy fully guaranteed? Not all companies fully guarantee the initial pre-mium for the entire level period. If two products have the same price, but one is guaranteed while the other is not, then the guaranteed product would be better.

Renewals: Most term policies have the ability to renew the policy beyond the initial level premium period. To products may offer identical premiums for the initial period and yet the renewal premiums may differ enormously. Another facet would be guaranteed renewability in which upon the initial period ending, the policy continues in force as long as the higher renewal premiums continue to be paid. You would not have to go through medical underwriting with guaranteed renewability.

Conversion: Many term policies offer the ability to exchange the term policy for a permanent policy without having to medi-cally qualify again. Should your health change and should you not be able to buy a new policy elsewhere, you may find the conversion option important. Not all policies offer the same time period for conversion to take place, and not all companies give you access to the same types of permanent policies.

Comparing Different Level Periods: Should you buy a 10 year term product, a 20 year term or a 30 year term? How long do you need the insurance? If you buy 10 year term, how might future cost increases after the 10th year affect the overall cost of insurance? Simply buying a 10 year term policy and expecting to renew the policy after the 10th year may be more expensive over time than buying a 20 year term policy.

Health Risk Conditions: Each life insurance company establishes its own health and lifestyle requirements to determine what premiums you may qualify for. Slightly high blood pressure may disqualify you for one company’s preferred health premium but it might be acceptable for another company’s preferred health premium.

Smoking Considerations: Not all life companies define smoking the same way. If you were a smoker and later quit, then how long ago that you quit may limit your choices. If you do smoke, some companies may offer products with better premi-ums depending on how little you smoke, or whether you smoke cigars or a pipe rather than cigarettes. What if you are cur-rently a smoker but you want to quit but you need insurance now? How a company responds when you were a smoker and have now quit is important.

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