How to Rate Life Insurance
Rating a life insurance policy goes beyond merely comparing the premium costs and looking at the claim payments. Many will pay out different amounts depending on when you die and how much you have paid in premiums. Fees can also make it more complicated to compare different life insurance plans. Some companies give special deals to customers who have multiple types of insurance with them. Compare policies carefully and you'll get a better deal on life insurance.
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Instructions
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Choose which type of life insurance you are interested in purchasing. The two main types are term and permanent life insurance. Term life insurance pays out a lump sum if the policyholder dies within the term laid out in the agreement. The company requires fewer premium payments as the term approaches its expiration date. Permanent life insurance provides the same payment regardless of when the policyholder dies.
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Examine the different types of permanent life insurance. Permanent life insurance can come in the form of both universal and whole-life insurance. Whole-life insurance requires that the policyholder make substantial premium payments during the first few years of the policy. These payments are then placed in a cash reserve and invested by the insurance company. This fund is paid out in installments when the policyholder dies. Universal life insurance is similar but gives the policyholder more flexibility in terms of how much is paid into the policy and when. Variable life insurance is another variant. It invests the cash reserve in higher-yield, higher-risk investment vehicles in return for a potentially higher claim payment.
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Assess how much money your dependents and heirs may need after your death. Larger insurance policies may be necessary if your heirs are elderly, disabled, very young or otherwise have difficulties supporting themselves. However, purchasing a larger policy than necessary may be an undue financial burden and be counterproductive.
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Compare the premiums that you will have to pay for the life insurance policy with the claim paid out after death. Calculate how much of the claim, if any, will be absorbed by estate taxes. Attempt to make a reasonable calculation of whether the life insurance policy is a competitive means of saving money compared with money market or low-risk mutual funds.
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Read the policy agreement carefully and calculate how much money you will have to pay in premiums relative to how much the policy will pay in claims to your heirs. Record all relevant fees. See if you can negotiate with the insurance agent to provide a better deal. Print out rates offered by competing insurance companies and ask a sales agent if he is willing to match or beat them.
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