cash-value policies is complicated. You’ve already paid for the front-end commissions and administrative expenses, and it isn’t worth repeating the expense. If you have held a dividend paying policy for more than five years, whether it is whole life or universal with a limited-payment premium, you will also trigger a tax bill if you switch. Uncle Sam wants his share of those tax-deferred dividends. In any event, don’t switch or cancel any existing policy until the second replacement insurance company has accepted you and issued a new policy.
If you have a term policy, switching is no problem because there is no cash value to consider. If you pay annually, you may get some of your premiums back if you decide to change in midyear.
Keep in mind that switching policies may also require that you take additional medical exams. Since the AIDS epidemic, many companies request physical exams and medical records for all policies–term or permanent–of $100,000 or more.
Review your policies every five years. As you get older and plan to retire, your insurance needs should decrease. By then, the mortgage is usually paid off, the children are gone and you’ve accumulated a good pension, or should have. You will probably only need about $50,000 or $100,000 of insurance, if any, to supplement a retirement income for your spouse and to pay off any estate taxes that may arise for your children.
If you choose to buy cash-value life insurance, buy your policy directly from the company. This can save you $300-$500 because your payments the first year will not go to paying an agent’s commission. This means that you start building up cash value almost immediately.
Several companies have begun offering no-load (no-commission) or low- load (low-commission) insurance policies by mail order. Contact the Council of Life Insurance Consultants, 303 E. Wacker Drive, Suite 210, Chicago, IL 60601; or call 312-819-0791.
Do some homework. Go to the library and check the A.M. Best rating book on Insurance companies. Best, the most well-known independent insurance company rating service, offers free publications that tell you everything you need to know about insurance companies. Look in Best’s Review, Best’s Insurance Reports and Bests Flitcraff Compend in the business section of any large public library and try to select a company that has been given an A rating.
Insurance companies are also rated by three other independent research services that may assist you in getting information: Duff & Phelps, 312- 368-3657; Moody’s Investor’s Services, 212-553-0377; Standard & Poor’s, 212-208-1527.
Or contact the following rate comparison firms. Each gives rate comparisons for at least five nationally known companies, and no agent will call you to make a sale: MasterQuote of America, 800-337-5433; TermQuote, 800-444-8376; SelectQuote Insurance Services, 800-343-1985; LifeRates of America, 800-457-2837.
Insurance Information Inc. (23 Route 134 `South Dennis, MA 02660; 800- 472-5800) is an independent consulting firm that can help you with honest answers and no sales pressure since it does not sell insurance. For a $50 fee, it will review your existing policy and compare it with