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The choice of a lifetime

Knowing whom to ask
Finding out about a company can be a challenge as most life insurance agents and brokers believe they are working for the best companies, and may, in fact, be unaware of certain problems. Companies compete aggressively to find new life insurance sales agents and do not always tell them about lawsuits or delays in making payments. If they did know, but wanted to keep their job, it would certainly not be in their best interest to discuss any current legal or financial issues with a potential client. Independent life insurance agents may be more informed simply because they can choose not to represent companies with poor reputations, but even they will not always know about captive companies.
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You can, however, find out a lot for yourself. You can do an Internet search on the company by using the company name and the word “complaints.” Of course, you must remember that any time a company doesn't pay a claim, even if the person falsified or withheld personal information on an application or did something else that would free the company from liability, it is often the company that gets scrutinized. You can also check the Better Business Bureau online where you are likely to find more professional cases along with how they were handled.

Another person who will give you reliable information is your local undertaker. Be aware that a funeral director may try to sell you a “pre-needs” policy, the only type of life insurance he can sell you. That is simply a policy for which you pay the premium, but the funeral home receives the benefit, and it may or may not be transferable to another funeral home. Nevertheless, if you ask specific questions indicating that you would like to know which insurance companies have proven the most reliable in paying claims, the funeral director should be able to help you.  

A third opinion
A report on any company can be obtained from any of the five top insurance rating companies. These, too, however, are sometimes biased on the side of leniency as companies pay to be rated. A.M. Best, for example, gives an A or better rating to 75% of the companies they rate, including AIG. One of the best rating agencies is TheStreet.com Ratings. They are independent, use more rigid rating methods, and are not paid by the companies they rate. They also give an A or better to less than 1% of all companies they rate. Even a B from TheStreet.com is probably as good as an A from A.M. Best or some of the others.

Finally, if you are purchasing life insurance, you really don’t have to worry about the company going bankrupt and not paying a claim. While the company may delay if they have some excuse that would allow them to get out of paying, you will not lose your policy if the company goes out of business. All insurance companies are insured by their State guarantee associations. That provides funds for another company to buy out their business if they run into financial difficulty. Sometimes companies also merge with larger companies simply because of an opportunity to improve business even if they are not in financial difficulty. If that happens, your policy will be unchanged, but you will receive updated notification on whom to contact in the event of a claim.
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