I'm sure you've seen those commercials.
“Buy $500,000 of term insurance for $10 per month! Guaranteed. We won't even ask you health questions!”
Okay, so maybe they don't say exactly that, but it's pretty close.
They promise a ridiculous amount of insurance for very little cost. How can the do that?
Just a quick search for “Cheap Term Insurance” on Google yielded some 26,000,000 results! Apparently folks are looking for cheap term insurance!
But is it worth it?
If you are reviewing your life insurance plans and considering some cheap term insurance, you should take a look at a few things first:
1. What Kind of Rating Does the Insurance Company Have?
You definitely want to know what kind of ratings a company has before you buy life insurance from them.
Why? Because if they are not a reputable company and are on the brink of going out of business, then it really doesn't matter how cheap your term insurance costs because they won't be solvent enough to pay out on your death claim!
The life insurance industry has ratings they use to determine how stable, healthy and reputable a company is. The four main reporting and rating agencies are A.M. Best, Moody's, S&P and Fitch.
The ratings are simply a way to gauge the insurance companies' likely financial future.
For example, a low rating generally means the company doesn't have many assets or financial reserves available, which could obviously affect the claims-paying ability of the company.
You'll probably want to revisit your insurance company's rating since these can fluctuate due to poor decision making or economic environment.
So, make sure you check these ratings out with any company before you buy insurance.
2. What Kind of Reputation Do They Have and Has There Been Any Complaints
You don't want to deal with a company that will cause major headaches for you, no matter how cheap the term insurance is going to be.
Each state has its own insurance department that handles complaints and can give you an idea of what kind of company you are dealing with.
In my opinion, I would much rather spend a few more bucks a month dealing with a solid and reputable company who handles customer complaints promptly and respectfully than deal with some company who treats their customers like garbage once they've made the sale!
It's not worth saving a few bucks to deal with an insurance company that has had numerous compaints and doesn't care about its customer.
Here the National Association of Insurance Commissioners (NAIC) web map, which will take you to your state's insurance department web site.
3. What is the Company's Customer Service Philosophy
Once you sign on that dotted line, what happens next?
Will you have a dedicated agent available to service your needs, or will you have to call in to an 800 number and get re-routed several times and never get a straight answer.
4. Do They Have the Mark of Approval?
The Insurance Marketplace Standards Association was created to promote clear standards for ethical business transactions in the life insurance industry.
According to their site:
- IMSA was created by the insurance industry to promote high standards of ethical conduct in the way insurance companies conduct business with consumers.
- Insurers undergo a rigorous assessment of their market conduct practices – including marketing, sales and distribution – by an independent third party assessor.
- The IMSA logo can be displayed only by an insurance company that has been successfully measured against IMSA's Principles and Code of Ethical Market Conduct.
- For insurers to maintain their IMSA member status, they must demonstrate that their ongoing business operations abide by IMSA's strict code of ethical market conduct. Every three years, insurers must confirm their market conduct practices.
So you can see that cheap term insurance isn't as simple as calling up and getting approved.
There are some things to check into to make sure your insurance company has good ratings, a good reputation, the seal of approval and will take care of the customer relationship over the long run.
Have you bought term life insurance? Did you find a good deal on your policy, and did it give you pause at just how cheap it was? Did you ask any of these questions? Tell us your thoughts in the comments.