Finding Coverage

Once you’re ready to protect yourself and your loved ones, the next step is getting a policy. Determining how much and what kind of insurance to buy is one of the most important financial decisions you’ll make, but because it can also be complicated, many people choose to work with a professional.

You can buy life, disability and long-term care insurance and annuities through an insurance company or a financial professional.

When you work with a company, you’ll apply for coverage through one of the financial professionals they work with who will present products specifically from their employer. When you work with an independent financial professional, they’re affiliated with several different insurance carriers and can offer multiple options.

Because each insurance company calculates risk differently, your rates can vary. That’s why it’s smart to compare companies and financial professionals before you make this important decision.

Choosing a Company

Now that you’ve made the decision to purchase a policy, how do you know if the company you choose to purchase through is the right one? Here are some tips to guide you through the decision.

Check out a company’s ratings.

The best way to check the financial health of a company is by looking at its “rating.” Several private companies conduct financial analyses of insurance companies and their reports can typically be accessed online, via the phone or by visiting your local library. Some will provide their ratings for free and others will charge a small fee. Keep in mind that not all agencies use the same ratings system. For instance, Aaa is the top rating at Moody’s, but A++ is the best ranking at A.M. Best. So be careful when comparing information from different ratings agencies. Also remember that a company’s rating is just one of several factors to look at when considering a purchase. If you’re evaluating two policies and one is underwritten by a company with an A.M. Best rating of B+ (“good”) and the other is from a company with an A rating (“excellent”), don’t automatically assume you should buy from the higher-rated company. If the policy from the other company has more of the features you’re looking for, it might be the better choice.

Does company size matter?

Yes and no. Most of the largest insurance companies have been in business for decades and some date all the way back to the mid-1840′s. When a company has been in business that long, you can be fairly certain that it understands the complexities of the insurance business, knows how to manage risk and grow assets, and has a history meeting long-term financial obligations. But that’s not to say that you shouldn’t consider doing business with smaller companies. There are hundreds of small- to medium-sized insurance companies, and many have been around just as long (and meeting financial obligations just as long) as their larger counterparts.

Purchasing through your workplace.

Most people buy life insurance through financial professionals or brokers, and for good reason: Determining how much and what kind of insurance to buy is one of the most important financial decisions you’ll ever make, but it can be complicated. A financial professional will conduct a thorough insurance needs analysis and provide you with policy recommendations that are based not just on knowledge of company ratings, but on personal dealings with the companies he or she is recommending.

Check for complaints against a company.

Life insurance companies are regulated by state departments of insurance, which track complaints filed by consumers. To look up complaints against a particular company, visit the National Association of Insurance Commissioners’ searchable database.

The Bottom Line

The “right company” for you is the one that provides you with appropriate recommendations, products and prices, has a record of outstanding customer service, and the financial capacity to meet its financial obligations to you and your beneficiaries when they come due.

Choosing a Financial Professional

Determining how much and what kind of insurance to buy is one of the most important financial decisions you’ll make, but because it can also be complicated, many people choose to work with a financial professional. A qualified financial professional will conduct a comprehensive financial needs analysis, and walk you through the multitude of questions you need to consider to determine how much and what kind of insurance is right for you, given your budget. And what many people don’t realize is that when you sit down with a financial professional to discuss life insurance, the consultation is free. Of course, the quality of advice you get is dependent on how good the financial professional you work with is.

Here are five tips to help you choose the right financial professional to work with:

Get referrals.

The easiest way to start your search is to get referrals from the people you trust such as friends, family members and other professional advisors you already work with, like lawyers or accountants. You can also try Life Happens’ online locator.

Find out about their specialties.

Make sure that the financial professional you select has the expertise to meet your needs. One financial professional may specialize in life insurance, another in long-term care insurance. Whatever their specialty, good financial professionals will take the time to listen and ask questions about your objectives, help construct a basic game plan, and work with you to find the right insurance solutions for your needs and budget.

Ask if they hold any professional membership.

A financial professional who is a member of professional associations, such as the National Association of Insurance and Financial Advisors (NAIFA) or the Million Dollar Round Table (MDRT), means they adhere to a stringent code of ethics and are committed to enhancing their skills and knowledge.

Schedule a meeting.

Interview at least two financial professionals to establish a basis for comparison in terms of qualifications and character, not just fees. Ask for customer references and check that the financial professional works with financially sound insurance companies.

Inquire about their education and training.

If you are not familiar with the letters listed after a financial professional’s name, ask about them. Professional designations, such as Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Financial Services Specialist (FSS) and Life Underwriter Training Council Fellow (LUTCF) indicate that the financial professional has completed advanced training, passed rigorous exams and is serious about professional development.

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