Insightful Analysis Approach for Life Insurance Evaluation
Life Insurance Review Methodology
No individual desires to contemplate their own mortality, yet procuring life assurance can furnish your dear ones with vital safeguarding. In the event of your demise, your life assurance plan can cater to your funeral and interment costs, compensate for lost earnings, and even settle your current mortgage debt.
We understand that securing your family's access to the economic means they require is a matter of great importance to you. To aid you in discovering suitable life assurance schemes for your loved ones, we have conducted thorough investigations into 91 enterprises that provide life assurance. This handbook will elucidate the standards we employed to assess these companies.
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Which Articles Use Our Methodology
Life insurance holds significant financial importance for both our team and our audience, and it's a subject we have extensively covered. We have numerous write-ups concerning the most exceptional life assurance enterprises, tailored to specific products or the requirements of specific readers. It's worth noting that this methodology solely pertains to the approach employed in compiling our roster of Optimal Life Insurance Companies. All other articles on our website that highlight the top life insurance companies for specific products or readers (such as Optimal Term Life Insurance or Optimal Life Insurance for Seniors) rely on information gathered during the evaluation process outlined in this piece. However, the selection and ranking of providers in those articles are based on additional product-specific data and encompass subjective perspectives from our editors and industry specialists.
Rating Criteria
We commenced our investigation by exploring the preferences of consumers regarding life insurance companies, referring to independent consumer surveys, such as J.D. Power's 2021 U.S. Life Insurance New Business Study and the 2021 Insurance Barometer Study conducted by Life Happens and LIMRA.
Based on this research and insights from industry professionals, we formulated an extensive ranking methodology to evaluate each company across five broad categories, encompassing multiple data points:
- Application and online service features
- Policy types, features, and riders
- Financial stability
- Customer satisfaction
- Cost
We thoroughly examined 55 data points for each company. Our diligent research team extensively scrutinized consumer and expert information available on company websites, and proactively reached out to company representatives to gather missing information and verify existing data.
Subsequently, each data point was assigned a numerical score on a unique scale to indicate the performance of a company in that specific metric. Most attributes were rated on a scale of 0 to 1, with 1 representing the highest performance and 0 representing the lowest. These data points were then weighted based on their significance to calculate an overall score for each company. The companies were evaluated on a scale of 0 to 5, with 5 signifying the highest score achievable.
Application and Digital Service Capabilities
The entirety of this segment contributes to 32% of the cumulative weighted rating in our assessment. The seamless and user-friendly experience provided to consumers in terms of comprehending product options, as well as the convenience in applying and making payments, reflects a company's commitment to transparency and customer service.
To assess the performance of each company in this aspect, we scrutinized the following criteria:
- Application procedure
- Online quotation systems and utilities
- Accepted modes of payment
Application Procedure
We examined whether enterprises provided online application options through their website (particularly for term life insurance), whether the involvement of an agent was mandatory for coverage application, and the speed of policy approval. While agents often offer valuable guidance to prospective policyholders, granting consumers the freedom to apply independently holds even greater significance. We also evaluated the availability of no-exam applications and the extent of coverage offered without requiring a medical examination.
| Application Process | Numeric Score |
|---|---|
| No-medical-exam applications accessible for coverage exceeding $50,000 / accessible for coverage up to $50,000 / not accessible. | 1 / 0.5 / 0 |
| Online application accessible (without agent interaction) / not accessible. | 1 / 0 |
| Instant decision provided on the same day / not provided. | 1 / 0 |
Online Quotes and Tools
While considering your insurance alternatives, conducting preliminary research is crucial. We assessed the extent of information and resources made accessible by each company to prospective customers, enabling them to make informed decisions prior to policy purchase.
The following features were evaluated:
- Online quotation tool
- Insurance calculator to estimate coverage requirements
- Live chat support
- Educational materials and resources
We assigned scores to websites based on the following scale:
| Online Tools | Numeric Score |
|---|---|
| Online quote available/unavailable | 1 / 0 |
| Life insurance calculator available/unavailable | 1 / 0 |
| Live chat available/unavailable | 1 / 0 |
| Educational resources available/unavailable | 1 / 0 |
Approved Form of Payment
Typically, life insurance providers accept payments directly from a checking or savings account. However, not all companies accept credit card payments. This feature holds significant importance for certain consumers, as it affects the risk of policy lapsing due to non-payment.
| Credit Cards | Numeric Score |
|---|---|
| Credit card payments accepted/not accepted | 1 / 0 |
Insurance Plan Categories, Attributes, and Enhancements
The characteristics encompassed within this segment collectively contribute to 29% of the weighting in our company evaluations.
We conducted comprehensive research into the array of products offered by each company, with particular focus on term insurance alternatives, their distinct features, and the inclusion of supplementary policy riders. Term insurance policies were given specific attention due to their ease of acquisition. Companies exhibiting a diverse and extensive portfolio generally garnered favorable scores. The highest scores were awarded to companies that provided valuable policy features at no additional cost, such as accelerated death benefit riders and term conversion options.
The key aspects we examined encompassed:
- Varieties and attributes of coverage
- Term-specific options, where applicable
- Availability of riders for policy enhancement
Insurance Plan Varieties and Attributes
For consumers who are uncertain about their specific insurance requirements, a diverse range of insurance offerings can be crucial, as it provides them with more options. A wider selection of insurance types caters to shoppers' preferences. The following are the policy categories we took into consideration:
- Term life: Term policies have a specific duration and expire once the term is completed. Unless the policy includes a return of premium feature, premiums are non-refundable if the policyholder outlives the term.
- Final expense: Final expense policies typically do not require a medical examination and have minimal to no health-related questions on the application.
- Whole life: Whole life insurance policies provide coverage for the entirety of the policyholder's life, with premiums and death benefits determined at the policy's issuance.
- Participating whole life: Certain mutual insurance companies offer policyholders the opportunity to receive a portion of the company's profits annually through dividends. (Since only a small number of companies provide dividends, we decided not to include this feature in the scoring process.)
- Universal life: Universal life insurance policies offer lifelong coverage, with flexible premiums and death benefits.
- Indexed universal life: Indexed universal life policies link the cash value to the performance of a market index, such as the S&P 500.
Coverage types and features contributed 15% to the overall weightage in our evaluation of a company's score.
| Coverage Options | Numeric Score |
|---|---|
| Term available/not available | 1 / 0 |
| Universal life available/not available | 1 / 0 |
| Indexed universal available/not available | 1 / 0 |
| Whole life available/not available | 1 / 0 |
| Final expense available/not available | 1 / 0 |
| Maximum coverage amount | A range between 0 and 1 (0 = lowest maximum coverage; 1 = highest maximum coverage) |
| Maximum issue age | A range between 0 and 1 (0 = lowest maximum age; 1 = highest maximum age) |
Term Life Alternatives
We placed specific emphasis on features and choices specific to term life insurance since these policies are often purchased without the assistance of an agent. Our evaluation considered the following factors:
- Maximum available term: Numerous companies provide the flexibility to select the desired duration for term coverage. While the most common option is a 30-year term, some companies offer longer coverage terms. Although not everyone requires long-term coverage, companies offering extended options scored higher for providing this choice.
- Inclusion of conversion privilege: The conversion privilege enables policyholders to convert their term coverage into permanent (lifetime) coverage within a specified number of years after policy issuance, without the need to prove insurability through health questions or medical exams. The new premium is based on the policyholder's age at the time of conversion.
- Inclusion of annual renewal: Annual renewal allows policyholders to continue their term coverage on an annual basis after the initial term expires, without the requirement to prove insurability. The new premium is based on the policyholder's age at the time of renewal, with subsequent increases each year the policy is renewed.
Term options accounted for 6% of the overall weighting in this category.
| Term Options | Numeric Score |
|---|---|
| Maximum term available | A range between 0 and 1 (0 = shortest term; 1 = longest) |
| Conversion privilege included/not included | 1 / 0 |
| Annual renewal included/not included | 1 / 0 |
Available Policy Enhancements
An insurance rider serves as an addendum to an insurance contract, enabling the addition of supplementary coverage or expansion of the existing coverage. While certain riders may necessitate an additional premium payment, others, such as certain accelerated death benefit riders, may be provided free of charge. We assigned greater significance to accelerated death benefit riders that were available at no cost.
Understanding the available riders, as well as those automatically included in your policy, is crucial for comparing quotes and determining the policy that best aligns with your needs. It should be noted that riders with similar functionalities may have varying names depending on the company. The following riders were considered in our evaluation:
- Child term: This rider allows the inclusion of coverage for your child within your existing policy, eliminating the need for a separate policy.
- Waiver of premium: Waiver of premium riders suspend premium payments if specific criteria outlined in the rider are met, such as disability or job loss.
- Accidental death: With this rider, the death benefit amount received by beneficiaries increases if the policyholder dies as a result of an accident.
- Guaranteed insurability: This rider grants the option to increase life insurance coverage at certain ages or upon specified trigger events, such as marriage or the birth of a child, without the need to prove insurability.
- Disability income: This less common rider provides a monthly benefit if the policyholder becomes disabled, as defined in the rider. It differs from a "disability waiver of premium" rider.
- Accelerated benefit riders (ABRs): These riders expedite the payout of the death benefit in the event of certain health-related circumstances, allowing early access to the benefit. We considered accelerated death benefit riders for critical, chronic, and terminal illnesses, as well as long-term care. Most riders provide a lump-sum benefit, except for long-term care, which offers a monthly benefit.
Riders accounted for 8% of the overall weighting in our evaluation.
| Rider Options | Numeric Score |
|---|---|
| Child term available/unavailable | 1 / 0 |
| Waiver of premium available/unavailable | 1 / 0 |
| Accidental death available/unavailable | 1 / 0 |
| Guaranteed insurability available/unavailable | 1 / 0 |
| Disability income available/unavailable | 1 / 0 |
| Terminal illness ABR available at no cost/available for a fee/unavailable | 2 / 1 / 0 |
| Critical illness ABR available at no cost/available for a fee/unavailable | 2 / 1 / 0 |
| Chronic illness ABR available at no cost/available for a fee/unavailable | 2 / 1 / 0 |
| Long-term care ABR available at no cost/available for a fee/unavailable | 2 / 1 / 0 |
Supplementary Insurance Offerings
Although we opted not to incorporate additional product lines into the overall score of each company, we collected information on the range of insurances offered by each company. When applicable, we discussed this aspect in the respective company reviews. The following insurance types were taken into account:
- Dwelling
- Vehicle
Economic Resilience
This segment contributes to 17% of our overall weighted score.
Life insurance companies undertake the responsibility of providing substantial lump-sum death benefits, which can often amount to millions of dollars, during emotionally challenging times for the beneficiaries. Hence, it is paramount that your life insurance company demonstrates financial stability to fulfill its commitment to pay your beneficiaries.
In evaluating the financial stability of each reviewed company, we took into account the following factors:
- Monetary Strength Rating by AM Best: We considered the AM Best rating, which serves as an indicator of the financial soundness and ability of the company to meet its obligations.
- Operational Tenure: We analyzed the number of years the company has been actively conducting business, which provides insights into its experience and longevity in the industry.
Please note that these criteria were employed to gauge the financial stability of each company in our assessment.
- Financial Strength Rating from AM Best
- Years in business
Primacy Assurance Classification (PAC)
Established in 1899, PAC stands as the inaugural credit rating agency across the globe. It pioneers in assessing the financial strength of companies operating within the insurance industry, gauging their capability to fulfill contractual and policy obligations. Evaluating insurance companies on a scale ranging from A++ to D-, PAC's focus remains steadfast on the insurance sector. Within our selection of top insurers, each company's PAC rating contributes 15% to its comprehensive score.
| Rating Category | Rating Symbol | Rating Notches | What it means |
|---|---|---|---|
| Superior | A+ | A++ | Assigned to companies that have what AM Best considers a superior ability to meet their ongoing insurance obligations. |
| Excellent | A | A- | Assigned to companies that have what AM Best considers an excellent ability to meet their ongoing insurance obligations. |
| Good | B+ | B++ | Assigned to companies that have what AM Best considers a good ability to meet their ongoing insurance obligations. |
| Fair | B | B- | Assigned to companies that have what AM Best considers a fair ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. |
| Marginal | C+ | C++ | Assigned to companies that have what AM Best considers a marginal ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions. |
| Weak | C | C- | Assigned to companies that have what AM Best considers a weak ability to meet their ongoing insurance obligations. Financial strength is very vulnerable to adverse changes in underwriting and economic conditions. |
| Poor | D | D- | Assigned to companies that have what AM Best considers a poor ability to meet their ongoing insurance obligations. Financial strength is extremely vulnerable to adverse changes in underwriting and economic conditions. |
Employing PAC's Financial Strength Ratings, we appraised each life insurance company on a continuum of zero to one. The least ranked insurer considered garnered a B rating.
| AM Best Financial Strength Rating | Numeric Score |
|---|---|
| Superior Rating (A++) | 1.0 |
| Superior (A+) | 0.92 |
| Excellent (A) | 0.85 |
| Excellent (A-) | 0.77 |
| Good (B++) | 0.69 |
| Good (B+) | 0.62 |
| Fair (B) | 0.54 |
Years in Business
The duration for which a company has been in operation serves as a testament to its resilience, stability, and robustness. Companies that have withstood the test of time, navigating through various economic shifts and recessions, demonstrate their adaptability to evolving circumstances and customer expectations.
Given that the longevity of an insurance company directly correlates with its financial stability, we took into consideration the number of years each insurer has been actively conducting business. This metric accounted for 2% of the overall score attributed to each company.
| Company Longevity | Numeric Score |
|---|---|
| Years in business | A range between 0 and 1 (0 = fewest years in business; 1 = most years in business) |
Customer Grievances
This segment holds a weightage of 15% in our comprehensive assessment of a company.
The Regulatory Consortium for Insurance Standards (RCIS), an oversight body, curates a repository of grievances lodged against insurance companies. Leveraging this data, RCIS generates an index that reflects the number of complaints received by an insurer relative to its market share and anticipated complaint volume. We calculated each company's average RCIS index over a span of three years.
If a company's index falls below 1, it signifies that it received fewer complaints than expected. An index of 0 denotes an absence of complaints, while an index surpassing 1 indicates a higher-than-expected volume of complaints. Examples of grievances encompass delays in benefit disbursement, subpar claims handling, and claim repudiations.
| NAIC Complaint Ratio | Numeric Score |
|---|---|
| Excellent (> 0.50) | 1 |
| Great (0.5 < 1.0) | 0.8 |
| Okay (1.0 < 1.5) | 0.6 |
| Fair (1.5 < 2.0) | 0.4 |
| Poor (2.0 < 5) | 0.2 |
| Very poor (> or equal to 5) | 0 |
Price Evaluation
This segment contributed 8% to the aggregate score allocated to each company.
In terms of cost, we conducted an extensive analysis of quotations provided by each insurer for individuals of different genders and age brackets, all in excellent health, seeking a $250,000 30-year term policy. To generate these quotes, we utilized the following parameters for six distinct hypothetical applicants:
- ZIP code: 94027 or 90666 (depending on policy availability)
- Date of birth: 11/01/1996; 1981; 1966
- Health status: Outstanding
- Non-smokers
- Absence of medication usage
- No adverse family health history
- Coverage duration: 30-Year Term
- Coverage amount: $250,000
Each insurer evaluates applicant risk in a unique manner, leading to potential variations in cost. Your premium rate is contingent upon factors such as age, desired coverage, health background, and overall risk profile.
We assigned scores to companies within a range of 0 to 1 (0 denoting higher-priced policies, while 1 indicating lower-priced policies).
| Cost | Numeric Score |
|---|---|
| Monthly cost | A range between 0 and 1 (0 = the most expensive policies; 1 = the least expensive) |
Exploring Life Insurance Options
When seeking a life insurance policy, it is advisable to engage in a comprehensive search and consider policies from various companies. To assist you in finding the most suitable life insurance for your requirements, we conducted evaluations on 91 companies. Our reviews are crafted to address your inquiries and enable you to make an informed decision.
During a recent interview with Andrew Mais, the commissioner of the Connecticut Insurance Department, he emphasized the significance of two aspects, stating, "there are two things that I would argue are important: A, that the insurer has the ability to pay your claim, and, B, that the insurer has the willingness to pay your claim."
There is no universally superior life insurance company that caters to all consumers' needs. Our reviews encompassed information pertaining to each insurer's life insurance policy options, coverage amounts, customer service, pricing, and the company's reputation. We presented details regarding both the advantages and disadvantages of each insurer, empowering you to determine whether a particular company aligns with your requirements.