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How to choose a Life Insurance company?
First let's look at the big picture. There are over a thousand life insurance companies selling insurance policies in American, and many of these are members of the same main company; so since they aren’t truly competitors of one another there are not truly a thousand different life insurance companies.
Having separate companies allows a group to offer its products through different channels, to more efficiently meet regulatory requirements of particular states, or to achieve other various organizational goals. So it's estimated there are probably more like three hundred main life insurance company groups.
Now, not every group has a company licensed to operate in each state.
So Tip #1 is: It's generally recommended you buy from a company licensed in your State, because then you can rely on your State's insurance department to help if there's a problem.
And if the insurance company becomes insolvent, your State's life insurance guaranty fund will help only policyholders of companies it has licensed. To find out which companies are licensed in any state, contact your State's department of insurance.
There are several other tips to keep in mind when selecting a life insurance company:
The premium for the policy isn't the same as the cost of the protection portion of the policy. One policy might have a higher premium but also offer more benefits (for example, it might pay policy dividends) than another. Or both might promise dividends, but in different amounts at different points in time. In each case, the higher-premium policy might have a lower cost of protection. How can you tell what a policy’s cost is? Companies should tell you a policy's Net Payment Cost Index and its Surrender Cost Index. Use the Surrender Cost Index if you’re thinking of keeping the insurance only for a specific period of time; use the Net Payment Cost Index if you expect to keep the policy indefinitely. Generally, the lower the cost index, the better.
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