How to select one insurance policy when there are so many options?

Does it matter at all?

Perhaps there is no perfect solution to your situation, perhaps there are several solutions for which we cannot find easy rankings, and perhaps there is something you prefer the most that I cannot provide(I doubt it, but at least in theory there is such a case, e.g. if you want the product of a company that works through its own agents only). The analysis, comparison and selection of policies can, and should, be done relying on several criteria. Usually what we can find is a small bunch of options that are clearly better than the majority of other options. "Clearly better" might mean serious cost savings (up to 30-50% on premiums; or perhaps tens of thousands in returns from investments), or better quality features. Your personal preferences play important role especially when evaluating these quality features.

Also, it is worth mentioning that at the other end of the spectrum there are a few policies that would be serious mistakes to choose, - but how could you avoid that if we do not do our homework? The final decision should be made by you, based on the criteria you feel the most important at that moment.

In theory, a broker can get you the product from almost any insurance company. More realistically, if a broker knows the offerings of 10 or 12 insurers well, and has access to them, then there is a good chance that some of those insurance products in his/her reach are hard to outperform by any products he/she doesn't really has access to.

I see problems and the danger of substandard service when a broker actually has considerably less contact with insurers than that. I think the chance of finding a really good solution to the customer from such a limited choice is considerably less than if the selection is from among the offerings of 10 to 15 companies (even if we presume an equal level of expertise and integrity on the part of the agent who does or facilitates the selection). Quite simply, there is no insurance company that could provide the solution for all. As a consumer, you are rightfully prudent if you demand a broker to use one of the software that can compare the products of over 30 companies each. To use a laptop computer for presenting alternative solutions from which you can choose is not extravagance any more; instead, it should be a basic requirement. Long ago it was OK for people to go to the blacksmith if one of their teeth had to be pulled; there might have been some reason for the disappearance of that practice (apart from the disappearance of also the blacksmiths themselves).

What makes one policy superior to another?

  • An obvious first answer to that question is: the premium, that is the price. Most people have just no idea how widely the premium of sometimes identical products differ. (check some examples for yourself).
  • Qualitative aspects of the product. There is a multitude of these aspects, and their relevance is context-dependent. With a term policy, e.g., it's very important that it be guaranteed; in most cases, also convertibility and renewability is a basic requirement. (And its not indifferent, e.g., to what other policy you can convert to.) Future premiums also should be guaranteed and the cost of the protection on the long run - as opposed to just on an initial-premium basis - should be carefully analyzed.
  • The flexibility of various products can be different, in terms of how much you are in control of your own money accumulating in an investment attached to some universal life policies. Also the choices of investment that are available in various policies are quite different.
  • The availability of certain riders (that is a kind of supplementary contracts to the basic policies you can opt for) can be important to you; their contents and prices are different as well. E.g., you can save on administration fees, can ensure that your policy remain in force when you are disabled and cannot pay the premium, can offset the erosive effect of inflation on the purchasing power of benefits, can get partial or residual benefit when partially disabled or when earning less because of a disability (even when you are healthy again), or can get part of the death benefit in advance if hit by a terminal illness.
  • The financial stability of not all the insurance companies are the same. Size of the company is not a valid indicator of financial strength. No-one can be quite sure of the financial health of any company on the very long run, of course. Still, there are more or less reliable indicators of danger from this angle (seeTRAC), as well as organizations (e.g., CompCorp) and ways you are advised to use.
  • Definitions of basic concepts, such as health or smoker status, occupation, or residual income, e.g., can be quite different in the practice of various companies. You should read the small print, ask a lot, and demand everything important in writing. (see a few of the nuances that might be important at selection and ranking)

Checking out the pages on the general evaluation of various group policies, including association plans, and insurance offered by banks will add further aspects to consider.

... and there is much more to it. If I would want to go into further details then I wrote a new book beside the other books I can recommend. Let me draw your attention here again to the available sources of information on these topics on the Internet.

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