When it comes to finding life insurance products that meet your needs and budget, there is no substitute for consumer education, and for many, the research process begins online.
Aided by web-based calculators, online information guides, and tools that allow for easy cost comparisons, consumers today are well equipped to research the wide variety of life insurance policies available and determine what’s the best life insurance for them – regardless of whether they ultimately purchase a policy online or seek the guidance of a financial professional.
“Researching your life insurance options online is a great first step to getting a grounding in the multitude of options that are available,” said Marv Feldman, president and chief executive of Life Happens, a nonprofit group founded by industry organizations, in an email interview. “There are virtually products to fit every need and budget. But understanding the basic, different types and their benefits will help you think about what’s right for you and your family.”
As with most consumer products, an informed buyer is also less likely to commit some of the most common and costly mistakes when purchasing a life insurance policy.
That includes over- or under-insuring, buying the wrong type of life insurance policy for your needs, or purchasing a policy from a company with a lesser financial strength rating, as determined by the four independent credit rating agencies — A.M Best, Fitch Ratings, Moody’s and Standard & Poor’s.
“I absolutely recommend clients do their own due diligence online, but then very often I find that they like to bounce questions off of me,” said James Raiola, a MassMutual financial professional in Warwick, Rhode Island. “I can very often add a more personal touch and perhaps point out something they didn’t think about.”
Whether you are in the market for life insurance, or merely weighing your options, he said, it is important to solicit information from credible sources — and review multiple sites.
Where to turn for information
Nonprofit groups, advocacy organizations and government agencies, offer a wealth of consumer education material online.
The National Association of Insurance Commissioners, for example, an association of state life insurance regulators, provides a Life Insurance Buyer’s Guide that seeks to help consumers identify policies that might make sense for them and make more informed decisions as they select a policy.
Before they buy, the NAIC advises individuals to be sure they can afford their premium payments now and in the future, especially if that premium is likely to rise. Also, the buyer’s guide indicates consumers should purchase life insurance only if they plan to stick with it, as it can be “very costly” if they quit making payments in the early years of the policy. And, they should never drop an existing policy and purchase another without a thorough study of both, as it can also be more expensive to replace your policy if your health has declined or you have aged significantly since the original purchase date.
Consumer Action, a consumer advocacy and outreach group, also offers a multilingual Insurance Checkup tool to help consumers reassess their coverage annually so they remain adequately insured. The group advises policyholders to reassess their coverage after every major life event, including a birth, death, or marriage. Your need to protect against risk may also change after you retire, pay off your mortgage, get your kids through school, or earn substantially more than you did when you first purchased the policy, it suggests.
Similarly, Consumer Action provides an e-pamphlet called “A Few Facts About Life Insurance: How to Get the Coverage you Really Need,” which outlines the various channels through which to purchase life insurance (agents, brokers, insurance companies, banks, and employers). And, it offers information on consumer rights and discrimination. When buying life insurance, the group suggests obtaining quotes from several agents or companies to avoid overpaying. Ask your attorney, accountant or financial professional for recommendations, and as you shop, compare not only premiums, but cash value, death benefits and fees, the e-pamphlet suggests.
For those still learning the ropes of life insurance, MassMutual also offers informational content , as well as a comprehensive guide to life insurance. Also useful is this article on 9 questions consumers should ask to aid in their decision-making process.
Tools that can help
Online tools and calculators also provide more personalized information, tailoring your search results to your unique financial position.
The NAIC offers a valuable search tool that allows consumers to research the insurance companies they are considering purchasing coverage from before they buy, including licensing information and key financial data.
MassMutual also provides a Life Insurance Planner tool to determine how much life insurance you may need.
Should you buy online?
Some insurance companies also enable consumers to purchase their policies online (direct) – typically, term life policies.
In many cases, a financial professional is available via real-time messaging or by phone. Others enable consumers to solicit online quotes, but require that they call in to purchase their policy through an agent.
While permanent life insurance offers lifetime protection, in which a death benefit is paid to the beneficiaries no matter how long the policyowner lives (as long as the premiums are paid), term life insurance provides coverage for a fixed period of time, such as 10 or 20 years. When the term concludes, the death benefit ends (or often can be retained by paying higher premiums).
Consumers who are considering a permanent life insurance policy with a cash value component, such as whole life, universal life, or variable life, are more likely to require guidance from a financial professional, said Feldman. (Related: Working with a financial professional, instead of going alone?)
“While online tools are great resources, they aren’t going to be as personalized as talking one-on-one with an agent or insurance expert, whether that’s online or in-person,” he said. “My advice is to use online tools to get started with a basic understanding, but then meet with a professional who can help you really assess your needs and options. And don’t underestimate the importance of consulting ‘offline’ sources too – talk to your family, friends, and other professional advisors for recommendations and advice.”
Whether you are actively shopping for life insurance, or merely exploring your options, the Internet can be a valuable tool for getting the biggest bang for your buck. Consumers should research the policies available, carefully consider the implications of canceling an existing policy, and utilize online tools to calculate their coverage needs. Whether or not they choose to purchase a policy online, however, they may still wish to seek the advice of a financial professional.
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This article was originally published in February 2017. It has been updated.