Working with an agent

After reviewing the various life insurance policies available, you might still be unsure about which best meets your needs. The American Council of Life Insurers (ACLI) recommends consulting an insurance agent. Jack Dolan, spokesperson for ACLI, says an agent can help find a policy that is specific to your needs. “Look at the recommended policy with care to be sure it fits your personal goals," Dolan says.

Carefully study your agent's recommendations and ask for a point-by-point explanation. Make sure the agent explains items you don't understand. Because your policy is a legal document, it is important that you know what it provides.

ACLI suggests these tips when purchasing life insurance:

• Ask for specifics of coverage so you can look at all your options.
• Contact the state insurance department to determine if a company or agent is licensed in your state.
• Check financial strength ratings to determine if your potential insurer is financially stable.
• Be wary of offers of "free" life insurance policies. Nothing is free. A good example is "stranger-originated life insurance" where the elderly are offered money from investors to buy their insurance policies.
• Answer all application questions honestly. Do not omit information.
• Make sure you get your policy within 60 days; if not, contact your insurance company to find out why.
• Your state likely guarantees a "free look" period, which is often 10 to 30 days after the policy has been in effect. If you decide you don't want to keep the policy, you will be given a full refund.
• Check the effective date on the policy.
• Review your policy every year or when a major life event occurs, such as buying a new house, having a child or getting married or divorced.
• If you have a complaint with an insurance company that isn't resolved after contacting a customer service representative, your state's department of insurance can help.

Insurance experts recommend these tips when deciding which type of life insurance to purchase:

If your agent recommends a term life policy, ask:

• What are the Standard & Poor's, A.M. Best, Fitch and Moody’s ratings of this insurance company?
• What is the initial rate-guarantee period? Is this policy renewable past the initial rate-guarantee period without a physical exam? If so, what are the premiums?
• Is this policy convertible to permanent insurance without a physical exam? If so, for what period of time do I have the right to convert?

If your agent recommends a cash value policy, ask:

• What are the Standard & Poor's, A.M. Best, Fitch and Moody’s ratings of this insurance company?
• Can you tell me, in writing, why you are recommending cash value insurance for me at this time?
• Why should I combine my life insurance protection needs with my investment objectives?
• Can you please prepare an analysis for me that shows the true cost of this cash value insurance policy over 5, 10, 15, 20, 25 and 30 years versus buying term life and investing the difference in long term bonds over those same time periods?
• How much is your first-year commission on this proposed cash value policy versus your commission on an equivalent term life insurance policy?
• Are these proposed annual premiums within my budget?
• Why do you think that I can commit to paying these premiums over the long term, perhaps decades?
• How much will I receive if I surrender the policy?