Comparing Policies May Yield Significant Savings

The financial stability and claims paying ability of most insurance companies are rated by watchdog agencies and their summary balance sheets are available in the public domain. A life insurance contract is only as good as the company behind it, so balance sheet strength and ratings are important measurements in the purchasing decision.

Most life insurance contracts have health classification pricing models that reflect your health condition. Some companies focus on the healthy sector of the population, while others focus on impairments. Since the vast majority of non-group life insurance is underwritten, it’s important to shop around for the best deal.

Life insurance policies generally have two expense tables or rates. One is the non-guaranteed current company practice and the other is guaranteed contractual. The disparity between both rates can be substantial, so there’s embedded value to a policy where the difference in rates is close.

Cash value life insurance policies have various crediting methods: dividend, interest, indexed and subaccounts. The earnings can be measured for performance in comparing annual statements from each year. But ordering an in force ledger can compare the original proposal to the actual performance. Requesting an in force ledger should be part of the annual review with your agent and filed along with your policy.

Morbidity policy riders may be embedded in a life insurance policy or assessed an extra charge. They can cover a variety of events from long-term care, to critical illness and terminal provisions for imminent death. It’s important to know that there’s no free lunch and these “ad ons” could affect the policy performance. One last thought: The contractual language on how benefits are triggered and what is paid out is critical, so secure an explanation from your agent or the insurance company

An optimum policy needs to include a top health classification, low expense loads and good earnings performance, the trifecta of financial efficiency.