Before you buy a life insurance policy, you should compare insurance rates, choose a trustworthy agent, and check the reliability of your insurance company.

After familiarizing yourself with the basic types of life insurance policies Term or Whole Life Insurance, it's time to investigate costs. The cost of the same coverage can vary considerably from company to company. Often, relatively small mutual companies charge lower rates than some of the bigger companies.

Once you've picked out a policy, you can buy it directly from the company or through an insurance salesperson or broker. The cost will be the same, but it may be helpful to get some information or help from a local agent.

Normally, a salesperson sells for one company only, while a broker can place your policy with one of several. In theory, this would seem to be a reason to prefer a broker, but in practice, the integrity of the person you are dealing with is far more important than is the legal relationship to an insurance company or companies. Look for a person who will function as an ally, offering additional information and proposing alternatives. If you get too much quick-sell pressure, contact someone else.

Finally, keep in mind that many insurance policy variations are of the "bells and whistles" type, minor differences that don't mean nearly as much as some insurance agents may claim. And one more tip: some salespeople recommend that you don't buy term insurance, or try to talk you out of it, for no other reason than the much higher commission they'll get from selling you whole life or universal.

How to Find a Trustworthy Insurance Agent

Knowing you need a trustworthy agent and actually finding one are two different things. As you may have guessed, one of the best ways to find a good agent is to ask for references from friends, family members and co-workers. Also, if you belong to a local group that puts out a newsletter or an email bulletin, post a note asking for recommendations.

Insurance agents and brokers must obtain a license from the state in which they do business. Contact the state licensing agency and check to make sure the salesperson is licensed and doesn't have any disciplinary proceedings pending. Many states provide this information online. You also might want to call the Better Business Bureau or state or local consumer affairs agencies and ask about the number of consumer complaints filed against the salesperson. Finally, speak with several agents and note whether the agent asks probing questions about your insurance needs or just tries to sell you a product. You should also compare the insurance products each agent offers to see which is the best deal and which best meets your needs.

How Safe Is Your Insurance Company?

Before you sign on the dotted line, you should check out the reliability of your insurance company. As some surprised and angry insurance policy owners have learned, insurance companies can encounter serious financial trouble, and even go broke. For instance, a few insurance companies invested heavily in junk bonds during the '80s, and paid the price of insolvency when glimmers of fiscal (and societal) sanity returned to these economic areas in the '90s.