Life insurance basics, Part 3
- By Milt x_Zall
- Feb 22, 2001
In two previous columns, I discussed the types of life insurance and the
advantages and disadvantages of each. In this column I'll cover how to locate
a qualified agent.
After you have thought about your financial needs and become familiar
with the basic types of life insurance, it's time to choose a company and
Where do I purchase life insurance?
About 1,700 companies in the United States sell life insurance. While
some consumers prefer to buy policies directly from a company, most people
buy life insurance through agents or brokers.
How do I choose a company?
Before purchasing a policy, check the company's financial condition.
Ask an agent or request information from your state's insurance department.
Contact the insurance department to be sure the company is licensed in your
You can also check the financial health of a company by looking at its
"rating." A number of services rate the financial strength of companies,
and publications that list these ratings usually can be found in large public
or business libraries. The major services are Moody's Investors Service, A.M. Best Co., Duff & Phelps LLC and Standard and Poors.
How do I choose an agent?
Collect the names of several agents through recommendations from friends,
family and other sources. Find out the following:
1. Make sure the agent is licensed in your state. In addition, agents
who sell variable products must be registered with the National Association
of Securities Dealers and have additional state licenses.
2. Ask the agent which companies he or she represents and what types
of policies these companies sell.
3. Find out if the agent has any professional designations. Professional
designations that life insurance agents may earn include Chartered Life
Underwriter (CLU) and Life Underwriter Training Council Fellow (LUTCF).
Agents who are also financial planners may have other designations,
such as Chartered Financial Consultant (ChFC), Certified Financial Planner
(CFP) or Member of the Registry of Financial Planning Practitioners. An
agent with one of these professional designations has met certain eligibility
criteria, taken an exam and takes continuing education courses.
4. Find out if an agent is a member of a professional organization.
The major association for agents is the National Association of Insurance
and Financial Advisors. NAIFA's local associations provide educational seminars
and help update agents on trends. Similar training and services for financial
planners are available through the American Society of CLU & ChFC, the
Institute of Certified Financial Planners (ICFP) and the International Association
for Financial Planning (IAFP).
Zall, Bureaucratus columnist and a retired
federal employee, is a freelance writer based in Silver Spring, Md. He specializes
in taxes, investing, business and government workplace issues. He is a certified
internal auditor and a registered investment adviser. He can be reached