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When you are looking to purchase life insurance, it is essential you are as thorough in the investigation of the insurance company as they will be of you. While price is a large factor in your decision, it should not be the only one. There are many insurance companies that are not what they appear to be on the outside, so you will need to do a little legwork to see exactly where the company stands.
When you are evaluating an insurance provider, there are several key things you should be looking for including:
Proper Licensing of the Insurance Company
You should double-check the insurance provider is legally licensed to operate and issue insurance policies in your city and state. If the company does not provide this information up front on their website, you can contact the office in your state that handles insurance licensing to verify the accuracy of their licensing.
Financial Ratings of the Insurance Company
There are major rating companies that can provide the company data pertaining to its financial strength and stability. Not all life insurance companies are rated for every service. The ratings provide a glimpse into the financial future of the company. A low rating may mean the company does not have significant assets available that may affect the future payments on claims. If the company is headed for financial trouble, you may not be able to secure payments when you file a claim. Higher ratings mean the company is financial stable and will likely remain strong in the future.
There are several rating companies where you can check an insurance providers rating including Standard & Poor’s, A.M. Best, Fitch Ratings, Moody’s Investor Service, and The Street.com.
The Insurance Marketplace Standards Association (IMSA) was established as a way of quelling criticism from the public about the life insurance industry. If an insurance company is a member of the IMSA it has gained a stamp of approval of the organization. The insurance company must complete and pass a strict review of ethics and insurance practices to earn this approval. Continued membership requires a retest every three years. Membership in IMSA is not required and companies not listed as members should not be ruled out completely. The membership with IMSA is just an extra measure of company reliability.
Your state should have a method for handling customer complaints regarding insurance companies. Most states generate a complaint report annually which totals the number of complaints received. The report will then rank the company in relation to the company’s market share. Complaints can be minor or serious and your state should be able to provide more detailed information about the consumer complaints lodged against the life insurance company.
Doing your homework on the life insurance company before even considering a policy is a good way to protect yourself now and in the future. You want to find a company you can rely on that will still be around when you need them. It may also be worth your time to contact the companies you select directly to check in with the level of customer service they provide. Often your gut instinct will let you know whether or not this is the company you want to deal with for the long haul.