How to Compare Life Insurance Policies

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By Kelcey Lehrich
eHow Contributing Writer

Article Rating: (1 Ratings)

Life insurance is used to protect loved ones and business partners from the loss of a breadwinner or partner. There are several factors to consider when shopping for life insurance. There are two main types of insurance, term life and permanent life coverage. This article will focus on term life, which the majority of the market buys. It's easy to compare one term policy to another for comparison shopping.

Difficulty: Moderate

Instructions

Step 1

Be aware of the face amount of a policy -- the amount that will be paid out to beneficiary upon the death of the insured. When comparing insurance offers make sure the death benefit amounts are equal. Some companies offer price breaks at certain levels to lower the cost per thousand of coverage. For example, a policy for $500,000 may have a lower cost per thousand dollars of coverage than a policy for $250,000.
Step 2

Consider the type of insurance. Term insurance contracts are in place for a limited amount of time, such as 10 or 20 years, and are easy to compare. The key here is to be comparing policies that are issued for the same length of time. The longer the term of coverage, the more the policy costs.
Step 3

Consider the riders. Different contracts offer different riders for additional coverage. Be sure to take these features into account when making your decision and pay only for the ones that you need. Two popular examples of riders are "Waiver of Premium" and "Accidental Death and Dismemberment." "Waiver of Premium" halts premium payments if the insured is disabled and unable to work. "Accidental Death and Dismemberment" pays an additional death benefit if the insured dies in an accident such as a car crash.
Step 4

Consider the financial strength of the issuing companies. An insurance contract is only as good as the company that issues it, so do your homework and make sure your insurer is financially secure. Fitch, Moody's, and Standard and Poor's are companies that rate insurers. These ratings should be readily available on each company's website or in its sales literature. If you're buying a contract lasting 10 or 20 years or more you'll want to be sure the company will be there and ready to pay.
Step 5

Consider the cost. All things being equal, look at the cost to determine the right contract for you. Term insurance isn't terribly expensive to begin with, but a given contract can vary greatly in price from insurer to insurer, sometimes by 20 percent to 30 percent.

How to Compare Life Insurance Policies

References

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