When you are looking at purchasing life insurance you should look for various items with the different carriers. You should look at their proposed rates, financial ratings, conversion options, and specific underwriting guidelines.
The proposed rates are important as that is the amount that you will pay if you qualify for that rate. It is important to understand that a quote is just a guestimated rate. You could come back with a better rating and a better rate or a worse rating. Make sure you understand the underwriting rating that has been assigned to you for the quote. For example, did you get quoted preferred even though you have diabetes.
The financial ratings and strength of the company that will underwrite your business is important. You want to make sure they have good strength and will be able to pay the claims. It is great to get the best premium rate, but if they won’t be able to pay the death benefit, who cares.
Do the insurance companies that you are looking at have good conversion options. When I say conversion options, I mean good permanent insurance options. Conversion allows you to convert from term to either whole life or universal life with no proof of insurability. This can be a very valuable option and make sure to consider this.
The last thing to consider when you are looking at multiple carriers is how each company underwrites for different underwriting issues. For example, is there a carrier that underwrites better for smokers or high blood pressure
Just getting started trying to figure out what type of life insurance you need. It can be really confusing and many people in the insurance industry make it very complicated to understand. Should you buy a term policy? What is a term policy? How many years should it be level? What is Whole life and universal life and should I create a blend of permanent and term insurance? How much coverage should I have? How do I calculate this? What does the rating of the company mean and how do you analyze this? Does this term carrier have a good conversion option for me down the road?
These are all good questions and we try to really simplify it for our clients and bring it down to earth. The most important thing we emphasize is getting the right amount of protection. First and foremost as a beginner to life insurance, get a death benefit that suits your situation (we can walk you through a simple analysis). If all you can afford at this moment is term, than get that on the books, so you have the protection. You can always convert some or all of it to a permanent plan down the road. Term is like renting and permanent is like buying and building equity. You want to select a term that will provide protection for the period that you will need it. For example, you have a child that is 2 and want to have at least 1 million dollars of coverage until they graduate college. The child will finish up at about 22, so a twenty year level term would probably be the most appropriate. A permanent plan (whole life or universal life) can be very beneficial, but starts at a much higher premium than term. The permanent plan premium will remain level as the term premium will go up after the initial level period. Obviously, being a permanent plan it sets up to last for your entire life. Blending term and permanent can be a good idea to give you the best of both worlds and a price tag that you can afford at that point.
We work only with companies that have an A rating or better. As you select a company, make sure that the company has at least an A rating and is not facing a major downgrade. We provide our clients with up to date ratings as that can change quarter to quarter. Talk to a Paramount Consultant and we can walk you through the companies and also discuss which ones have a good option to convert to permanent plans.
When you are looking for your next term policy it is important to have an agent shop rates for you as rates are dropping yearly. On top of just the rates, you want to select a company that has good financial strength with all the current financial turmoil. The average term rate has dropped by an average of 5% every year for the last ten years.
Another factor when looking at term rates, is the conversion options of the company. Are there good permanent options to convert to if you want a permanent policy down the road? Do they offer universal life, whole life, variable life, etc. These are all important questions to ask your agent.
Term rate quotes are just quotes technically and just a guestimation of what the premium might be based on the limited info the agent has. Just because an agent quotes you select preferred, don’t assume you can get that rate. You might be able too, but you have to go through underwriting before you truly know the premium. If something seems too good to be true, it probably is. For a free analysis, and a realistic analysis you can speak to a Paramount Consultant
We will help you evaluate your different options as well as provide you insight on different company’s. Certain company’s give better rates to smokers and that is important as you apply if you are a smoker. What if you suffer from Sleep Apnea or are a pilot, where is best to apply? At Paramount, we look at all of those factors and consider all of them to help our clients get the best offers.
When you buy life insurance or are evaluating what you have, it is important to check on the conversion options. Most company’s offer a least one option to convert their term products to permanent life insurance. What is great about the ability to convert is that it requires no additional underwriting or approval from the insurance company. Life circumstances change and people’s needs change, so it is a door that you want to leave open. Many of the clients want to buy term and feel that is all they ever want. That may be the case now, but you never know where you will be in 15 years.
The main options that you can convert to typically are universal life insurance, variable universal life insurance, and whole life insurance. Each one has benefits, but not all policy’s are created equal.
Option 1- Universal life- is a type of permanent insurance that has the most flexibility. There is flexible range that can be premium amount that can be paid into the policy. If there is enough cash value to cover the cost of insurance in the policy than premiums can be drawn from the cash value. Payments into the policy above the premium are credited to the cash value and the cash value will be credited with interest (usually using an interest rate index). The interest rate varies based upon the insurance company.
Option 2-Variable universal life- is similar to regular universal life with its flexibility. The difference is that the amount above the premium is put into a separate account that is invested in the stock market. This has more upside and downside risk for the cash value with the money being invested in the stock market.
Option 3-Whole life insurance is the most traditional form of permanent life insurance. It has a set premium that will never increase but it isn’t flexible and will last forever s long as the premium is paid. Whole life has a guaranteed cash value and the policy’s can actually do better than the guarantee. If the company declares a dividend than that is credited to the cash value as well, but dividends are not usually guaranteed.
It is important make sure your policy has at least one of the conversion options above.
Do you ever feel like you have 20 statements coming from 20 different places? Do you have your life insurance with multiple company’s? How much face amount do you have on each policy and is it enough? How much longer does your term policy remain level? Do you have the best rate available for your age and health? What are your conversion options if you want to convert your policy (s) to some type of permanent insurance like whole life or universal life? Do you have term life or permanent life insurance?
These are all important questions and good questions to ask yourself about your coverage. Our Paramount consultants like to review coverage with all of the new and existing clients and make sure that everything is aligned. We will walk the clients through their existing coverage to determine how much and what type of insurance they have. We look at consolidation options, how much face amount, rates, health changes, whether any of the conversion options make sense at that point, and if they are with carriers offering solid conversion options.
This is a free service that we offer and it is a great exercise to go through to make sure you are protecting your families financial future. It is similar to getting your oil changed in your car. If you don’t change the oil, the car will not perform at the optimal level and could be disastrous if ignored too long. On top of that, you may save some money in the short term and create a lot of wealth in the future.
