insurance

How to get the best life insurance

Richard M. Weber, MBA, CLU, AEPFor most people, shopping for life insurance probably does not rank near the top of their "fun things to do" list. In fact, it likely falls just ahead of filling out tax forms and just behind going to the dentist.

But choosing the right life insurance policy can make all the difference to your family's long-term financial security. Finding the right policy at the best price involves a little work on your part, says Richard Weber of the California Institute of Finance at California Lutheran University in Thousand Oaks.

But he adds that people who change to a healthier lifestyle can lower their rates. While few people would turn down a cheaper policy, the bottom-line price is not everything. It is important to choose stable companies that will be around for the long haul. Weber outlines his thoughts below.

Aside from shopping around for the lowest premium on term life insurance, what can consumers do to get the lowest quote? Are there lifestyle or health changes they can make?

Insurers are generally concerned about current health and lifestyle -- with some "credits or debits" for family history. If Dad died of a heart attack at age 55 and his 30-year-old son has unregulated high blood pressure and cholesterol outside normal parameters, this applicant is unlikely to qualify for a standard rating.

However, if lifestyle factors include regular exercise and medication that is managing those conditions, some carriers may well consider a more favorable rate than "standard." Appropriate proportions of height and weight and smoking (including for many companies the "occasional" cigar) are also major issues to be considered.

Quitting smoking (a minimum of a year before application for most carriers) and beginning a reasonable but regular diet/exercise regimen to get body proportions back in balance are two of the most important actions the average consumer can take. And if you're on medications, take them as prescribed, and don't stop until or unless your doctor tells you to.

Medical information is only one part of the underwriting process; for most applicants still on the bright side of "middle age," there are avocational considerations. Does she participate in car racing on the weekend? Does he paraglide or fly experimental or "kit" airplanes? These, too, will be taken into consideration and could either affect the premium or whether coverage will be offered only with exclusions for some of the riskier avocations.

Beyond the quoted premium price, what should consumers look for to ensure that an individual life insurance company is the best one for them?

Make sure to compare an apple with an apple. Of course price is important, but does that very attractively priced term policy include the right to convert the policy up to a specific age (often 70) to any lifetime policy the company then offers? Is the company of high financial strength? Does it have a favorable reputation for being client-focused?

Life insurance at its core functionality is a future financial promise that is not likely to be called upon for 20, 30 or even 50 years in the future. And that promise needs to be absolute with no wiggle room. You'll want an insurance company with no currently apparent possibility the company won't be able to meet its obligations so long from now.

The state (departments of insurance) do a good job of putting together "guaranty associations" -- not federal guarantees, but a mandatory association of all carriers admitted to a particular state that will pool its resources and make certain that a death benefit (generally not exceeding $250,000) will be paid in the event of carrier failure. Cash values are covered at a lower level -- typically $100,000. That's why high financial strength today is important.

When comparing life insurance policies, how do consumers decide if term is better than another type of policy, such as whole life?

Term is the logical price choice -- and certainly the most popular cliche for the financial evangelists in print, on cable TV and on the Web.

If the client has tight resources, always fulfill the current total protection need before dealing with the long-term financial viability of the term product for long-term/lifetime needs. For this situation, it's the now that's important when there are family financial responsibilities and objectives that will fail without substantial amounts of life insurance in force at premature death.

When resources are available to consider so-called permanent policies such as whole life, universal life, guaranteed death benefit UL (universal life), variable UL, or indexed UL, pretty much the only good way to consider such policies is through a qualified professional life insurance agent.

Look for an agent who is ideally designated as a CLU (Chartered Life Underwriter) by The American College (a nonprofit private educational institution) -- and further, that the CLU is maintaining and upgrading her skills through membership in the Society of Financial Service Professionals. And while the designation du jour may be CFP (Certified Financial Planner), the curriculum leading to the granting of that designation does not generally include a great deal of sophistication about life insurance.

A professional life insurance agent or broker will be able to review your inherent risk tolerance, budget and resources, long-term financial needs, and protection time horizon to answer the following four key questions that I've found everyone has wondered about at some point in the exploration of life insurance.

  1. Do I really need it?
  2. If so, how much -- and for how long?
  3. What kind of policy is appropriate for my circumstances -- and regardless of type of policy, how do I know I'm not paying too much for it?
  4. With which insurance company shall I place my trust to provide the critical financial lifeline to my family?

We would like to thank Richard Weber of the California Institute of Finance at California Lutheran University in Thousand Oaks for his insights.

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