The loss of a loved one carries a huge emotional toll and can take a big financial one, as well. Life insurance can help provide monetary support for your dependents and loved ones after you die.
The concept is simple: You pay a fixed amount — the premium — every month, or once a year, for coverage. If you die, a person of your choosing — the beneficiary — is paid a set amount of money, otherwise known as the death benefit. The length of the coverage period — the term — and the amount of the death benefit are two of the variables that determine the cost of your premium.
There are essentially two types of life insurance: basic life insurance and life insurance bundled with a quasi-investment product. Bundled products, including whole life, permanent life insurance, universal life and any policy with a cash value component, are generally more complicated and more expensive. Term life insurance is the most straightforward and inexpensive life insurance choice for most people. “If I need to make sure my family or business is protected in the case of my passing prematurely, I want to focus on term insurance,” said David Gastwirth, an insurance strategist with American Business. “It’s the fundamental cornerstone of one’s insurance plan.”
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The best time to buy life insurance is when you’re young and healthy. (However, if you’re neither of those, it’s still worthwhile to buy a policy.) Most experts recommend that you buy a policy with a death benefit equal to 10 to 12 times your annual income and a term long enough to cover living expenses and future financial liabilities such as mortgage payments and college tuition. The cost of the policy — and your monthly or annual premium — is primarily determined by the length of the term and the size of the death benefit, although there are other factors that come into play, such as your health and age, your gender, whether you’re a smoker, and where you live. Adults in good health under the age of 40 can expect to pay between $25 and $50 per month for a 20- or 30-year term life insurance plan, with a death benefit around $500,000.
Term life policies’ death benefits typically start at $100,000 and go up to $3 million, which should be adequate to cover most people’s needs. (In some cases, you can get a policy with a $5 million benefit.) All things being equal, Gastwirth recommends erring on the side of more coverage, since the cost of a life insurance policy increases as you age — and, if you develop health complications later in life, you could become uninsurable. “Get as much as you can for as long as you can, without changing your lifestyle,” he said.
Best life insurance companies, compared
|Best overall||Best customer service||Cheapest and fastest||Best overall (runner-up)||Most flexible terms||Best customer service (runner-up)|
|Principal Financial Group||Northwestern Mutual||MassMutual / Haven Life||Nationwide||Banner Life / Legal and General America||State Farm|
|Go to website||Go to website||Go to website||Go to website||Go to website||Go to website|
|JD Power Customer Satisfaction Rank||4||1||12||6||N/A||2|
|Coverage terms||10, 15, 20 or 30 years||10 or 20 years||10, 15, 20 or 30 years||10, 15, 20 or 30 years||10, 15, 20, 25 or 30 years||10, 20 or 30 years|
|Death benefits||$200,000 to $5 million||$100,000 to $5 million||$100,000 to $3 million||$100,000 to $1 million||$100,000 to $10 million||Unspecified|
|Can you purchase a policy online?||No||No||Yes||No||No||Yes|
* The monthly term policy premium amount paid by a 35-year old in excellent health for a 20-year term life policy with a $500,000 death benefit.
We’ve compared coverage features, customer service rankings, corporate stability and the average price of a policy from 25 life insurance companies. The six companies highlighted below offer 20-year policies with a $500,000 death benefit for $23 to $32 per month (or $5,520 to $7,200 over the course of the term). The more expensive policies are offered by larger companies, including Northwestern Mutual and State Farm, which are known for superior customer service. Note that we omitted some companies because they don’t offer policies to residents in every state.
Here’s how the best of them stack up.
Best life insurance companies
We think Principal Financial Group offers the best combination of affordable coverage and customer satisfaction. It ranked 4th in J.D. Power’s 2019 customer satisfaction survey and had far fewer customer complaints than the industry average, according to the National Association of Insurance Commissioners.
Among the companies profiled here, Principal’s insurance coverage monthly premium was the second least expensive. A 20-year, $500,000 term life policy for a healthy 35-year-old costs $23 per month — compared to an average of $25.80. That, plus an A+ financial strength rating from A.M. Best and 140 years in the business, makes Principal a great choice for just about anyone.
Principal offers life insurance plan term lengths of 10, 15, 20, and 30 years, with death benefits ranging from $200,000 to $5,000,000. The $200,000 minimum is a bit higher than that of others’, but most people should opt for a policy with at least $250,000 of coverage, if possible.
Haven Life’s policies are backed by MassMutual, one of the biggest and oldest insurance companies in the US. But its modern touches and unequaled convenience are what distinguish it from the field.
Most insurance companies require you to meet in person with a financial advisor or company representative before being approved for a policy. (Some won’t even give you a quote without a phone call first.) In the coronavirus era, shopping for a policy from the comfort and safety of your own home is a particularly compelling prospect — and Haven Life is one of the few companies that will sell you a policy without requiring you to visit a doctor or lab first.
Most customers will eventually need to complete a medical exam within 120 days after signing up, but coverage starts immediately after being approved online. Your responses must be accurate, as any discrepancies could create issues with payment of the death benefit. As long as you have a reasonably complete understanding of your family’s health history (and your own), the insurance company application shouldn’t take more than 15-20 minutes.
Haven Life, a top life insurance company, had the lowest term life price quote among all the companies listed here. A 20-year, $500,000 policy for a healthy 35-year-old costs $22.34, compared to an average of $25.80. Haven Life offers term life policies ranging from 10 to 30 years, with insurance coverage benefits ranging from $100,000 to $3 million. MassMutual has a solid reputation for customer service and financial standing.
Though each of these companies has earned a reputation for respectable customer service, Northwestern Mutual is known as the best in the business. The largest life insurance company in the US, Northwestern topped JD Power’s 2019 customer satisfaction survey and has been recognized by the National Association of Insurance Commissioners for having the fewest customer complaints on average of all insurers.
Most of Northwestern’s term insurance policies span 10 to 20 years. Benefits start at $100,000 and go up to $5 million — but a company representative said on the phone that they’re always adding new products and you should speak with a financial advisor about what life insurance product makes the most sense for your situation.
Northwestern offers premium customer service — but the company’s policies aren’t cheap. With quotes that are roughly 20% higher than competitors, there are plenty of more affordable life insurance plan options. That noted, if exceptional customer service is your priority, Northwestern is the best choice.
Other good choices
With an offering that’s similar to Principal Financial Group’s, Nationwide doesn’t win any life insurance coverage category outright — but ranks consistently high in all of them. The life insurance company’s prices are right in line with the field, and they are known for good customer service and corporate stability.
State Farm’s prices are similar to Northwestern Mutual’s, but its more expensive policies earn excellent customer service marks and offer a lot of term length flexibility. You can also begin the life insurance coverage application process on the State Farm website, though in most cases you’ll eventually need to speak with a State Farm representative to finalize your insurance product application.
Banner Life insurance policies are issued by Legal and General America, the American branch of the British multinational financial services company. Legal and General wasn’t included in JD Power’s survey but the life insurance company has been around since 1836 and has an excellent reputation for customer service and affordability. And it’s one of the few companies we’ve seen that offers 25-year terms.
How we chose the best life insurance companies
All the companies profiled here satisfy the minimum requirements for a life insurance company. Our analysis prioritized customer service, financial standing and price — but each of these companies has earned respectable customer service grades from J.D. Power, a low complaint index from the National Association of Insurance Commissioners and an A++ or A+ rating for financial strength from A.M. Best.
Though some of their policies are less expensive than others, all of these insurance product companies offer competitive premium rates. Note that the exact price of your life insurance policy will depend on your health, location, sex and age. The bottom line: You can confidently choose any of these companies for a reasonably priced, comprehensive term life insurance policy.
Frequently asked questions
Should I buy life insurance?
If anyone relies on you for financial support — children, spouse or parent — you should have life insurance.
Many people buy a policy around the time of a major life milestone. When you take on debt to buy a house or send a child to college, a policy can help ensure that your obligations are paid even if you die. A life insurance policy can also help your dependents manage living expenses as well as burial and funeral costs.
I’m under 40 and in good health. Do I really need life insurance?
Yes. The best time to buy life insurance is when you are young and healthy.
I have health problems or pre-existing conditions. How should I shop for insurance?
It’s worth shopping around to see if any company offers a policy designed for your specific situation. Health insurance companies generally classify clients in one of four categories: Preferred Best (sometimes called “Super Preferred”), Second Best Preferred (or simply “Preferred”), Standard Plus, and Standard. Current or recent smokers are classified as either Preferred Smoker or Standard Smoker.
Each company has its own approach to classifying customers; some may categorize you as a smoker — even if you quit three years ago. Your categorization will help determine your life insurance coverage premium, so be honest and specific when speaking with an advisor or representative. And it’s worth the effort to identify a company and policy that will cover you affordably and effectively, whatever your health status.
How should I choose a life insurance term period?
You want a policy that covers the period of your greatest financial liabilities. If you’re buying insurance today to ensure that you can pay college tuition for a 12-year-old child, for example, a 10-year policy would make sense. It’s generally better to err on the side of longer, since the cost and availability of products will change as you get older.
How should I choose a coverage amount?
There are two ways to approach this. An “income replacement” strategy provides your family with a payout that’s sufficient to support them for 15 to 20 years, through a combination of principal and interest. An appropriate amount of coverage is roughly 10 to 12 times your current annual income.
The alternative is “expense calculation,” which correlates the size of the policy with your present and future financial obligations — such as a mortgage or college tuition (which currently comes to around $175,000 on average for a private 4-year institution). Both factors can help you when determining the size of your policy. Nationwide provides a useful online worksheet for a more in-depth look.
What should I do if my financial situation changes significantly?
Life is unpredictable — and when your financial situation changes, you’ll need to reassess your insurance coverage. If you no longer need insurance, you can always cancel your policy. If your obligations increase significantly — you take on a mortgage or have kids, for example — you can always purchase additional insurance. Even though life insurance is designed for the long-term, there are plenty of supplemental solutions for when circumstances change.
Should I buy a guaranteed life insurance policy?
For most people, the answer is no. Guaranteed life insurance policies are easy to get — even for older or less healthy people, who may not even need to take a medical exam. But the death benefit is typically very low and the premiums are high. Also, most guaranteed policies have a two-year waiting period: If you die during the first two years of coverage, the insurer will refund the premiums you paid — but not provide the death benefit.
What if my coverage term expires before I die?
Despite the name, life insurance is really more income insurance. It ensures uninterrupted financial support for your family. Once your children can support themselves, your mortgage is paid off and you’ve saved enough to cover your retirement, you’ll have less of a need for life insurance.
What is a “rider” — and should I add one to my policy?
A rider is an optional feature that you can add to a standard policy; they are usually available only for a whole life insurance policy or a universal life insurance policy. A chronic illness rider, for example, provides the insured with a portion of their death benefit if they’re diagnosed with a terminal illness. A disability rider waives or reduces the monthly premium if the policyholder becomes incapacitated.
Though that may sound attractive, most riders aren’t worth the expense. While they might only add a dollar or two to your monthly premium, that adds up over 10 or 20 years.
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Originally published earlier and updated as we periodically review new companies.