Once you’ve decided on the benefit amount that you want for a term life insurance policy, you should consider a few basic factors before deciding on which specific policy to buy. The first of these factors is price. Quotes can vary widely, as individual insurance companies use different formulas in order to determine risk. Thus, it’s a good idea to compare prices from different insurance companies.
Another factor is an insurance company’s financial ratings, which are based on the company’s financial stability. The higher the rating, the better and the more likely that you will be paid if you ever file a claim. A company should be rated by at least three of the major rating services. Contact an insurance company’s customer service department in order to request copies of its ratings reports. You also can ask your insurance agent for a copy of the rating service reports for any of the companies that he or she is recommending.
Also, consider the different terms available. An annual renewable term is the simplest and often least expensive form of term life insurance, but coverage expires after one year. More common is the guaranteed level term life insurance where the annual premium will be the same for a term of 10, 15, 20, or 30 years. However, the longer the term selected when you first take out the policy, the higher the annual premium will be. When calculating the premium, the insurer takes into account that as the insured grows older, a longer-term policy will be covering the years of the insured’s life that are more expensive to insure.