There are many different types of life insurance policies in the market. You have to decide which policy you need. This decision must be taken after considering your requirements and your budget. Once you decide on the type of policy, the next thing is to get the best value for money. This can be done by comparing similar policies from different companies.
A easy way to compare similar products is by using the comparison index which you can easily get from the insurance company or agent. There are two types of comparison index – yield comparison index and net payment cost comparison index. Both assume you will live and pay premiums for the period of index. The yield comparison index is a measure of cash value growth over the index period which takes into account the interest credited, the estimated value of the death protection provided, and the expenses charged. A higher yield index number generally indicates a better buy. Since this index reflects items other than interest earnings, it may differ from the credited interest rate advertised or guaranteed in your policy. A net payment cost comparison index helps you compare costs over the index period assuming you will continue to pay premiums on your policy and do not take its cash value. If your main goal is the death benefits to be paid to your beneficiaries when you die, you should use this index. A yield comparison index is more suited if you are looking at life insurance as an investment. When using these indexes to compare policies, make sure you compare index numbers only for similar policies – those which provide essentially the same benefits, with premiums payable for the same length of time. You must use the same amount of planned premium. Some policies are sold only on a guaranteed or fixed cost basis. These policies do not pay dividends; the premiums and benefits are fixed at the time you buy the policy and will not change. Ignore the small difference in index numbers. These small differences are easily offset by other policy features including the level and quality of service from the agent or company, the strength and reputation of the company, the history (track record) of how the company treats carious classes of policyholders.
Don’t just depend on this comparison index method. You should review your insurance requirements and financial condition. Select a policy with benefits that fits your requirements.
