Choosing small vs. large life insurance companies
When choosing the best life insurance company, is it best to stick with an insurer on the list of life insurance companies who write the most premiums? Not necessarily. There are certainly advantages to going with a major insurer, but quantity doesn’t always equal quality when it comes to market share.
What to look for beyond size
No matter the size of the carrier you’re considering, here are some quality indicators to keep an eye on when shopping for life insurance:
- Financial stability rating: A high financial stability rating from agencies like AM Best is a value add for life insurers. It reflects the insurer’s robust track record in paying out claims, which may be crucial during unexpected events. AM Best ratings range from A++ (Superior) to D (Poor).
- Customer service: A smooth claims process can be meaningful for grieving beneficiaries, but you may need to contact the customer service department many times before that point. Looking at J.D. Power scores, NAIC Complaint Indexes and customer reviews can give you an idea of the level of service a company provides.
- Ethical practices: The integrity of a life insurance company’s business operations is vital. Firms that adhere to high ethical standards in their dealings are more likely to be transparent with policy terms, fair in pricing and straightforward in the claims process.
- Community engagement: Insurers that actively contribute to community initiatives or engage in sustainable practices often hold a sense of corporate responsibility that goes beyond the bottom line. This commitment can be a reflection of a company’s values and how it might value its policyholders.
- Technological advancements: In a digital era, the ease of managing your policy online, from quoting to filing a claim, adds immense value. Insurers who invest in technology like efficient online quoting systems, accelerated underwriting processes and comprehensive mobile apps offer convenience and speed. Note that it’s rare for a life insurance company to allow you to finalize your policy purchase without speaking to an agent over the phone.
Choosing a large life insurance company
The most obvious reason to go with a large life insurance company is that they typically have more financial assets and, therefore, probably have an easier time achieving financial stability. Large life insurance companies also tend to have more years in the business. Northwestern Mutual, for example, the second biggest life insurance company in 2023, was founded in 1857. With more than a century and a half writing policies, this company is a leader in the industry with a strong track record of policyholder satisfaction.
The digital tools offered by large life insurers are often superior to those offered by smaller competitors. For example, you might be able to manage your life insurance policy through a smartphone app or get instant quotes online from a company that has the resources to invest in these features. Smaller companies may not have the budget to develop advanced technological tools.
On a similar note, larger life insurance companies can sometimes offer easier access to customer service channels. You may be able to get in touch with a company representative without having to pick up the phone, thanks to mobile apps and live web chat. But if you would rather dial in, larger companies typically extend phone hours or even provide 24/7 support.
Choosing a small life insurance company
On the other hand, small life insurance companies can sometimes have the upper hand by providing more tailored and personalized customer service. If you do business with a small life insurer, you might work with the same representative for years or even decades. This type of relationship may offer better recommendations for your individual needs – not to mention possibly providing friendlier and more personal service overall.
Smaller life insurance companies sometimes provide more specialized coverage. For example, some small life insurers are created specifically for certain groups such as military members or educators. A small specialty life insurer might also be a good choice if you are looking for a very precise type of coverage, such as final expense insurance.
Last but not least, if you have been denied coverage from a major life insurance company, it is worth asking around with smaller competitors. While large life insurers can afford to turn down customers, small companies may be more flexible in order to win business. It is possible that a smaller insurer may be willing to accept greater risk than a larger insurance company.
