There’s always a lot of talk about resolutions this time of year. It’s a New Year, after all, and that means many people are embarking on new beginnings or striving for self-improvement. It’s not all about losing weight or giving up cigarettes either. A number of the most popular New Year’s Resolutions are financial in nature, and one in particular – taking out a life insurance policy – raises some important questions about how certain aspects of the personal finance landscape operate.
It’s understandable why people would factor life insurance into their resolutions. I mean, New Year’s is when many of us finally address long-shirked obligations (plus, barely surviving New Year’s Eve can have that effect on you). Parents in particular want to make sure their loved ones are provided for, not burdened financially, if they pass away. Well, anyone who’s ever taken out a policy knows that while you can try to shop around for the best rates, offers aren’t finalized until your paperwork and physical exam results are processed.
That’s right, they’re initially based on assumptions and often change as the process plays out. It’s therefore almost impossible to ensure you’re getting the best deal.
Sure, you could always venture far down the application path with a number of different insurance providers, setting up appointments with a range of different doctors in order to get tests done and filling out pages upon pages of forms. But aside from being prohibitively burdensome, this approach might not even work since the final rates each company offers might be off the table by the time you get a basis for comparison.
So where does that leave us?
With a plan, of course. There’s not much you can do to guarantee the best possible terms in the current landscape, aside from leading a healthy lifestyle, reading reviews to determine how closely each company’s quotes adhere to their ultimate offers, and only pulling the trigger on a policy when the price is right. We can, however, try to make the process more efficient in the future.
Here’s what I propose:
- Establish a centralized database of application information: The life insurance market should learn from college and graduate school admissions and develop a process whereby consumers must only submit one set of paperwork and go through one round of medical tests. Insurance companies will therefore have access to the same information, their customers won’t be inconvenienced, and we can all have clear foresight about our life insurance options before we enter into an agreement.
- Implement doctor eligibility requirements: In order for that first part to work, a pool of doctors that are mutually-agreeable to the insurance companies must also be developed. That, of course, means they need to hammer out some sort of eligibility requirements to ensure that the medical professionals conducting exams have the proper education, training, and other qualifications.
- Create a competitive life insurance marketplace: When service providers have access to the same information and consumers are able to compare offers from a range of different companies at once, a race to the lowest price erupts. In other words, life insurance companies will compete for qualified customers in this revamped market that I’m proposing, and that’s certainly a good thing.
What do you guys think? Do you agree with my plan or have one of your own to share? Do you even see a problem with how the life insurance market operates to begin with? Let me know in the comments section below.