How to choose a life insurance company: 10 factors to compare before you buy
Choosing life insurance often starts with looking at premiums. But price is only one part of the decision. The company providing the coverage also matters because life insurance may remain in place for many years.
When comparing life insurance companies, consider factors such as financial strength, available coverage, customer service, the claims process, and independent ratings. Looking at the same factors across companies can give you a clearer picture of your options and help you make an informed decision based on your needs.
Whether you're buying life insurance for the first time or reviewing your existing coverage, taking time to compare life insurance companies can help you make a more informed decision. This guide explains the 10 important factors to evaluate before choosing a life insurance company and the questions to ask before you buy.
How to compare life insurance companies
Rather than focusing on a single feature, consider several factors together:
- Financial strength ratings
- Types of life insurance offered
- Coverage amounts and features
- Premiums
- Underwriting requirements
- Claims experience
- Customer service
- Customer reviews and complaint history
- Company history and experience
- Available coverage features
Using the same criteria for each company can make differences easier to understand.
| Factor | Why It Matters |
|---|---|
| Financial strength | Indicates an insurer's ability to meet long-term financial obligations. |
| Coverage options | Helps you find the right type of life insurance for your needs. |
| Coverage flexibility | Allows your life insurance coverage to adapt as your needs change. |
| Premium costs | Helps you determine if cost fits into your budget. |
| Underwriting process | Determines how you qualify for life insurance coverage. |
| Claims experience | Supports beneficiaries during the claims process. |
| Customer service | Helps throughout the life of your coverage. |
| Reputation and reviews | Provides insight into customer experiences. |
| Company history | Reflects long-term experience and stability. |
| Coverage features | Other differentiating features of the insurance. |
1. Financial strength and stability
Financial strength is an important consideration because life insurance companies take
on long-term financial obligations, including paying covered claims.
Independent organizations evaluate insurers' financial strength. Ratings are opinions, not guarantees of future performance, and each organization uses its own methodology and scale. Consider financial strength information alongside other factors when comparing companies.
2. Types of life insurance offered
Life insurance companies may offer different types of coverage. For a straightforward
comparison, three common categories to understand are:
Term life insurance: Provides coverage for a specified period, subject to the coverage terms.
Whole or permanent life insurance: Designed to provide lifelong coverage when applicable requirements are met. Some permanent coverage may include a cash value feature.
Guaranteed acceptance life insurance: Generally does not require a medical exam and may not require health questions. Eligibility requirements, age restrictions, coverage limits, and a graded death benefit or other limitations may apply.
Understanding the differences in duration, eligibility, features, premiums, and limitations can help you compare available coverage.
3. Coverage amounts and flexibility
Consider the coverage amounts and features each company makes available. Depending
on the coverage, features may include renewal or conversion options. Availability,
eligibility, costs, conditions, and limitations can vary. Review the coverage details to
understand what applies before making a decision.
4. Premiums
Premiums are one factor to consider when comparing life insurance coverage. They can
vary based on factors used in underwriting, the amount of coverage, the type of life
insurance, and other eligibility considerations.
When reviewing premiums, also consider what the coverage provides, how long it lasts, and any applicable limitations or conditions.
5. Underwriting process
Life insurance companies use underwriting to determine eligibility for certain types of
coverage. Traditional underwriting may involve an application, health questions, and, in
some cases, a medical exam. Some application processes may not require a medical
exam, although health questions or other underwriting requirements may still apply.
Guaranteed acceptance life insurance generally does not require a medical exam and may not require health questions. Age eligibility, coverage limits, graded death benefits, and other restrictions may apply.
6. Claims experience
Consider what beneficiaries may need to do when filing a claim. Questions can include
how claims are submitted, what documentation is required, how beneficiaries can check
claim status, and what support is available. Claims procedures and processing times can
vary depending on the circumstances.
7. Customer service and support
Customer service can matter throughout the life of the coverage. You may need
assistance updating beneficiaries, changing payment information, requesting
documents, or understanding coverage details.
Consider available contact methods, service hours, online account tools, and educational resources.
8. Customer reviews and reputation
Customer reviews can provide insight into individual experiences, but they should not be
viewed as representative of every customer's experience.
Consider reviews alongside more objective information, such as financial strength information and complaint history, to develop a broader picture of a company.
9. Company history and experience
Company history can provide context about an insurer's experience managing long-term
insurance obligations. However, longevity by itself does not establish the quality or
suitability of coverage.
Consider company history together with financial strength, available coverage, service, and other relevant information.
10. Coverage features
Coverage features vary by company and type of life insurance. When comparing options,
review what is included, what may be optional, and whether additional eligibility
requirements, costs, exclusions, or limitations apply.
For permanent life insurance with a cash value feature, review how cash value works under the coverage terms, including any conditions associated with accessing it.
Questions to ask when comparing life insurance companies
Consider asking:
- What types of life insurance are available?
- What coverage amounts are offered?
- What financial strength information is available?
- How does the underwriting process work?
- Is a medical exam required?
- What eligibility requirements apply?
- What limitations or exclusions should I understand?
- How does the claims process work?
- What customer service options are available?
- Can coverage information be managed online?
Frequently asked questions
How do I know if a life insurance company is financially strong?
Independent financial strength ratings can provide information about an insurer’s ability
to meet its ongoing insurance obligations. Because rating organizations use different
methodologies and scales, consider ratings in context and alongside other information
about the insurer. Ratings are opinions, not guarantees of future performance.
Is the life insurance company with the lowest premium the right choice?
Not necessarily. Premiums are one factor to consider when comparing life insurance
companies. You can also review financial strength, available coverage, eligibility
requirements, customer service, claims procedures, and applicable coverage limitations
to better understand the differences among your options.
Should I compare more than one life insurance company?
Comparing multiple life insurance companies can help you understand differences in
premiums, coverage options, eligibility requirements, underwriting, customer service, and
claims procedures. Using the same criteria for each company can make those
differences easier to evaluate.
What types of life insurance can I compare?
Three types discussed in this guide are term life insurance, whole or permanent life
insurance, and guaranteed acceptance life insurance. They can differ in how long
coverage lasts, premiums, eligibility requirements, available features, and limitations.
Review the terms of any coverage you are considering to understand what applies.
What should I know about guaranteed acceptance life insurance?
Guaranteed acceptance life insurance generally does not require a medical exam and
may not require health questions. Eligibility requirements, age restrictions, coverage
limits, graded death benefits, and other limitations may apply. Review the coverage terms
carefully so you understand when and how benefits are payable.
What do life insurance company ratings measure?
Financial strength ratings provide an independent organization’s opinion about an
insurer’s financial strength and ability to meet its ongoing insurance obligations. Rating
organizations use different scales and methodologies, so ratings should be considered
in context and should not be viewed as guarantees of future performance.
Conclusion
Choosing a life insurance company involves considering more than premiums. Financial
strength, available coverage, underwriting requirements, customer service, claims
procedures, and coverage limitations can all provide useful information.
No single factor determines which coverage is appropriate for everyone. Comparing the same factors across available options can help you understand the differences and make an informed decision based on your individual circumstances.
Key takeaway: Compare life insurance companies using consistent criteria, including financial strength, coverage options, premiums, eligibility requirements, service, and limitations.
How the AARP Life Insurance Program from New York Life fits into your comparison
The AARP Life Insurance Program from New York Life offers life insurance coverage for eligible AARP members and their spouses. Available options include term life insurance, permanent life insurance, and guaranteed acceptance life insurance, subject to eligibility requirements and coverage terms.
This article is provided by New York Life Insurance Company for informational purposes only. This article is not intended to provide tax, legal, financial or accounting advice. Please consult your own professional for advice specific to your circumstances.
