Comparing Costs

The next order of business is to shop for a good buy. Your chances are better if you use a special cost index developed to help in shopping for life insurance and available from the producer or the insurance company. The price of a given type of policy can vary from one company to the next. Moreover, companies are not equally competitive for all policies. Thus, one company might have a competitively priced policy for 24-year olds but not for 35 year olds.

The cost index provides you with a number that reflects the price of a policy - a policy with a smaller index number is generally a better policy with a higher index number. Your producer or life insurance company can give you more information about the cost index. In addition, it is important to remember the following points:

  • Cost comparisons can only be made between similar life insurance plans.
  • Index number comparisons should only be made for your age, for the kind of policy you intend to buy and for the amount of insurance you plan to purchase.
  • Small variations in index numbers might be offset by other policy features or differences in the quality of service you get from the company or agent.
  • Base your decision not only on a low index number, but also on whether you can afford the premium; whether you understand its cash values, if any, its dividends, if any, and its death benefits.
  • Do not use the cost index to determine whether your current policy should be replaced by a new one. The index applies only to comparisons of new policies.