Term insurance policies, their ratings and more

There are numerous term life insurance policies. As someone who has been a life insurance professional for over 20 years, I can honestly say that the best term life insurance companies, top rated term life insurance companies and top rated term life insurance companies are very similar. It’s not to say they’re all exactly the same, but they’re usually similar. Comparing term life insurance is really a matter of what matters to potential insurance customers.

Your priority

In my experience, most people worry about term life insurance, what it will cost them.

Obviously, some term life insurance policies are rated higher by companies such as AM Best, Moody’s, and Standard & Poor.

Some of the factors that determine a company’s rating are:

  • Financial strength

  • Financial stability

  • Ability to pay claims

  • Claims pay opportunity

If any of these factors, in addition to the others used, are important to you when comparing term life insurance, how important are these factors to you compared to price?

What if a company is considered one of the best term life insurance companies in the industry, but the premium costs are double that for the same amount of coverage from a company that is not considered one of the top rated term life insurance companies?

What is your priority?

Ratings

Just like in school, term life insurance and all insurance companies are rated on an AF basis.

Seems easy to understand, right?

Did you know that an A-rated company can be rated anywhere from A++ to A-?

Did you know that different rating agencies, including those mentioned above, use different criteria to determine ratings?

Did you know that an insurance company can be rated differently by the different rating agencies?

If an insurer gets a favorable rating from one rating company and a less favorable one from another rating company, which one do you think they make sure you know about?

to ensure

Insurance companies use the term underwriting to determine who pays how much for what. Different companies have different underwriting guidelines. The name literally means that someone in the company signs the policy and says that a particular person meets the company’s underwriting guidelines.

There are three main methods used for taking out life insurance policies:

  • Fully endorsed – most common – may include medical examination (blood/urine sample/statement from attending physician).

  • Simplified issue-less common-no medical examination-decision regarding the problem usually fast

  • Guaranteed Issuance – Anyone who signs up and meets certain conditions has a guarantee that a policy will be issued – (including life insurance in the event of death and graded death benefits)

There are also different insurance classifications. The most common:

  • Preferred-best rates

  • Standard-most common

  • Substandard, also known as rated or table

Some companies distribute the classifications. For example:

  • super preferred

  • Ultra preference

  • Standard plus

Table can be in the form of a number (usually 1-6) or a letter (usually AG) – the higher the number or letter, the higher the premium.

Convertibility

Some companies allow a term policy to be converted to a permanent policy at a later date without proving insurability.

Other companies allow conversion but require proof of insurability.

Some companies don’t offer convertibility at all.

If convertibility is offered, it is often within certain time limits.

If you’re sure you want a term and nothing else, don’t think about it.

Price

The main factors influencing the price:

1. Health

2. Age:

3. Lifestyle

They are numbered as such because that is generally the order of priority that companies use to classify potential customers.

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Poor health can and will exclude anyone regardless of age and lifestyle, and no amount of money will buy insurance. On the other hand, excellent health can go a long way towards lowering premiums.

A person’s age is the next factor. Age is compared with death rates. Different companies have different charts for death rates.

Another way to describe the death rate is how many years a person their age is from death.

Statistically, insurance companies know quite accurately how many people of a certain age will die before their next birthday.

Lifestyle is the third factor. The most common consideration is whether someone smokes, but there are others too, such as what someone does for a living. Certain professions are more dangerous than others.

A person’s hobbies also have an effect. Skydiving and speed races are often frowned upon and may not result in denial of coverage, but may result in higher premiums.

Regardless of all factors, the rates for women are almost always lower than those for men.

Fully subscribed vs. simplified issuance vs. guaranteed issuance

All things being equal, being fully subscribed will result in the best priced premium. Often, however, not all things are created equal.

Are you sure your health is as good as you think or is it possible that a blood/urine sample, saliva swab or doctor’s report may reveal something that you are not aware of, or that you are not the most ethical person, perhaps something you just don’t want to reveal?

A fully subscribed policy takes much more into account in determining the rating class and price than a simplified issuance policy.

Depending on your point of view, that could be an advantage or a disadvantage.

Assuming you’re honest and no information about you has yet been reported to the Medical Information Bureau (MIB), your chances of a policy being issued as requested is as high as 9 in 10 if you’re applying for a simplified issuance policy.

On the other hand, there is about a 60% chance that you will not qualify for a fully underwritten policy as applied for.

A guaranteed issuance policy will certainly be issued. You will know if you qualify before you actually sign the application. It’s yes or no. However, because it is guaranteed, the price is usually much higher unless it is a conditional policy, such as term life insurance.

Conclusion

Unless you know the ropes and/or can take the time to weigh all the factors when comparing term life insurance, an experienced professional can direct you the best term life insurance companies to consider.

That said, if you want to be absolutely sure you’re getting the insurance you want, it’s best to buy a guaranteed issue policy.

If you’re pretty sure you’re in good health, but don’t want to bother with a medical or paramedical exam (blood/urine), or if you don’t want to know about certain things that could affect your assets To take out insurance, you should consider a simplified issuance policy.

Once you qualify for a policy, assuming there is no fraud, you are the only one who can cancel the policy once it is issued. The insurance company cannot cancel you as long as the premiums have been paid.

It may be useful to request a guaranteed or simplified issuance policy first. Once issued, look for the best price and/or top rated term life insurance companies.

What’s best for you?

I invite all questions and comments.