Many people choose their insurance company simply based on the competitiveness of their life insurance quotes. While price is undeniably important, there is a host of other factors to weigh when making this vital decision. Here are the main points to keep in mind:
Similarly, it makes sense to do business with a company that has high ethical standards. Some life insurance companies subscribe to the principles and codes of conduct of the Insurance Marketplace Standards Association, a nonprofit organization that promotes ethical conduct in life insurance marketing.
The better a company's rating in these vital areas, the better your chances of being treated fairly, efficiently, and courteously.
The premium is the amount you pay the insurance company for the life insurance policy. Even for a given death benefit and type of insurance (e.g., term life), the premium can vary widely among companies, either because some insurance companies' policies have features that others do not or because some charge more than others for the same coverage. So the first step in comparing policies is to make sure you compare similar insurance plans, based on
Bear in mind, however, that the premium for the policy is not 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 (the amount of death benefits provided in the policy) and its surrender cost index (helps the individual to compare costs if he would choose to surrender the policy in the future and to collect the cash value). Use the surrender cost index if you are 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.
This article adapted from information provided by the Insurance Information Institute.