your policy for the next ten or twenty years. The lower the number is the less expensive the policy will be. This index is useful if you are most interested in the death benefit aspect of a policy, as opposed to the investment aspect. The other type of index, the surrender cost index, is useful to those who have a high level of concern about the cash value. This index may be a negative number. The lower the number, the less expensive the policy.
These two indexes apply to term and whole life policies. With universal life policies, focus on the cash value growth and the cash surrender value to make comparisons. Cash surrender value is the amount you receive if you cancel the policy. It is not the same as cash accumulation value. If you are shown two universal life policies, and they have the same premium, death benefit, and interest rate, then the one with the higher cash surrender value is generally the better policy.
Here are some questions to ask about policies:
How do cash values accumulate? An early, rapid build-up is generally preferable.
How has the policy's cash value performed in the past? You can get this information from a publication called Best Review, Life and Health. Determine how the policy performed in comparison with the company's projection and with other insurers.
Are any special features merely bells and whistles, or do they add value for you?
- What is the company's rating with Best, Standard & Poor's, and Moody's? You can find these publications in public libraries. The rankings should be in the top three to ensure that a company has financial stability.
- National Insurance Consumer Helpline
1001 Pennsylvania Avenue NW
Washington, DC 20004
Phone: (800) 942-4242