Your Life Insurance Policy is a Long-Term Commitment, So be Sure to Make a Safe Choice!

As you may know, buying life insurance is one of the easiest activities to procrastinate over. Most people must go through some life-altering event before they’re even willing to talk about life insurance, much less act on it. For instance, you may have recently gotten married, had children, or had a health scare, making you think about how your loved ones would fare in the event of your untimely passing.

Whatever the reason, it’s in your own best interest to educate yourself about life insurance beforehand. That way you can buy exactly what you need and can afford, rather than what some salesman is selling.

Let’s start with the big picture. Life insurance comes in many flavors, each designed to suit a specific need. For instance, there are policies that will pay off the balance on your mortgage. There are policies that will provide your family with a specified income stream for a fixed number of years after your death. There are policies where the benefit goes up in value as you get older. And there are even policies where the benefit goes down in value as you get older.

When you boil it all down though, there are really only two fundamental types of life insurance policies:

Permanent Life – As the name would suggest, this is a lifetime insurance policy. In a way, a permanent life policy is an investment where a portion of the premiums you pay to the insurance company go toward establishing a “cash value.” It can be withdrawn if you cancel the policy, or be used to pay for future premiums. It’s particularly useful for individuals who are concerned about their ability to pay premiums in later years.

Term Life – This provides insurance coverage for only a specified period of time. At the end of the term, the policy expires and you walk away with nothing to show. There is no cash value built up and your insurance coverage ceases to exist.

In other words, term life insurance provides temporary coverage. If you live past the end of the term, you will have made years of premium payments but receive no money in return from the insurer.

Based on current and historical life insurance company filings with the NAIC (National Association of Insurance Commissioners), $124 billion in term and permanent life insurance was taken out in 2016. That was a $21.6 billion increase from ten years ago, and a sharp rise from 2013, as you can see in this chart:

Meanwhile, according to our latest analysis of over 650 life insurers, 55.6% are rated “A” or “B”, giving you a wide array of safe choices for life insurance.

Why is that important? Because it doesn’t matter what type of policy you have or what the coverage is if your company is at risk of not surviving for the duration of your policy! The most important thing is peace of mind and confidence in your insurer, so you can go around your business without worrying about them.

Remember: According to the U.S. Census Bureau, the average term of a marriage ending in divorce is eight years. The average term life insurance policy is well in excess of ten years. So an insurance policy is an important, long-term relationship to be thought over carefully.

Besides the overall safety ratings, you may also choose to explore our “Recommended Insurers by State” to find a safe life insurer offering policies in your state.

Think Safety,

Gavin Magor

Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.