Best Life Insurance Companies for 2020
You know how to compare prices without compromising quality when you’re buying new running shoes or a laptop.
Buying life insurance should work the same way, and it does when you know how life insurance works.
In this post, I’ll share our research about the best life insurance companies. Then I’ll show you how to build the coverage you need while still saving money.
You can find the best life insurance by taking control of the shopping process.
Best Life Insurance Companies
Here are the top 19 life insurance providers for 2020:
|Company||BBB||J.D. Power Score||A.M. Best Rating|
|New York Life||A+||770||A++|
|Mutual of Omaha||A+||795||A+|
|Lincoln Financial Group||NR||750||A+|
How to Find Your Best Life Insurance Coverage
As you can see from their A.M. Best grades, all of the companies above sell stable coverage that could protect your family. You should expect nothing less than financial stability as you shop for coverage.
But you should also expect more. These companies have financial strength, affordable premiums, and flexible coverage, but there’s a more important question to ask: “What is the best life insurance company for me?”
I’ll spend the rest of this post exploring answers to that question, starting with a closer look at each of the best insurance companies.
$--.-- / mo
Apply Today ⟶at havenlife.com
Best Life Insurance Company Reviews
I listed some data above about the best life insurance companies, but now that you know more about how your own life affects your shopping choices, I’d like to include some brief reviews of the best insurance providers:
1. Haven Life
Haven Life has created a unique niche in the life insurance world: selling large, high-quality term policies that don’t require a medical exam.
This isn’t the expensive type of no-exam coverage; instead, Haven uses algorithms to assess your health online.
If you’re younger than 45 and your health doesn’t raise any digital red flags, you could get up to $3 million in top quality coverage without the exam.
Haven has revolutionized online policy management tools, too. MassMutual, a top-rated insurer, backs these policies.
- Quick & easy application
- Above-average coverage limits
- Limited policy options
- Only for the healthy
2. Northwestern Mutual
Northwestern Mutual got 4 out of 5 stars for customer satisfaction in J.D. Power’s most recent survey, and A.M. Best rates the company A++, its highest grade.
Flexibility is this company’s greatest strength. Its term, whole, and universal life insurance policies can adapt to meet customer’s needs. Its whole life policyholders become shareholders in the company and earn dividends.
And Northwestern Mutual pioneered a new hybrid of whole and term life insurance policies called CompLife. As we’ll discuss later in this post, the underwriting process favors younger and healthier shoppers. This product helps your current age and health save money on life insurance premiums for the rest of your life.
- Adaptable life insurance products
- Access to dividends with whole life
- CompLife — the term-whole hybrid
- Medical exam remains a central component of underwriting
- Online options limited
AIG has a super-fast turnaround rate, lots of flexibility, and a great track record for customer service.
Most insurers offer standard term lengths (10, 15, 20 years, etc.). AIG can provide non-standard terms such as 18 or 22 years. AIG also has a full range of whole life products.
AIG has embraced the information age. You can apply and adjust your coverage online. You’d need to call to cancel coverage.
- Wide range of policies
- Award-winning company
- Faster-than-average approval
- Non-standard term lengths
- No online policy cancellation
4. Banner Life
Banner Life checks a lot of boxes — online access, great customer service, firm financial footing — but the company stands out more for its stance on complex health conditions.
With most companies, any health issue will automatically mean higher rates. Banner Life spends more time considering all the nuances of your life before classifying your coverage.
If you had diabetes, high cholesterol or high blood pressure, Banner Life would be a good place to start your insurance journey. Also, smokers could lower their premiums later, if they successfully quit.
- Great for health conditions
- Electronic application
- Great customer service
- No online policy cancellation
Protective excels with its rate reconsideration feature. Normally, you’d lock in premiums based on your current health. But Protective has a different approach:
If your health improves after you finalize your policy, you could apply for rate reconsideration without having to cancel coverage and start all over again with a new policy.
Protective’s application approval is slow, so if you need life insurance now, Protective may not be your best choice.
- Premium reconsideration feature for health markers that have improved
- Short application form
- Policy delivered by email
- Slow approval
Bestow has quickly become one of the top options for affordable term life insurance coverage.
Bestow seeks to simplify insurance. If you want simple coverage right away, you’ll like this company.
But simplicity has its drawbacks. Bestow offers 10- and 20-year term coverage only. If you need one of these products you can find rock-bottom rates — as low as $8 a month for the youngest and healthiest applicants.
Like Haven Life, Bestow assesses your health without an exam. If you have health complexities — or if you’re 55 or older — you shouldn’t apply.
- Low rates
- No medical exam needed
- Fast application
- No permanent or universal options
- Only for ages 21 – 54
Transamerica offers a full range of policy options, from standard term life to more complicated permanent coverage.
Transamerica offers some extra flexibility such as the ability to access your coverage early if you’re diagnosed with a terminal condition. Your beneficiary could also opt for an income stream rather than a lump sum payout.
These features aren’t exclusive to Transamerica, but this company does excel in this arena. That said, Transamerica shouldn’t be your first choice if you have a chronic health condition such as diabetes.
- Living benefits
- Income protection options
- No need for a medical exam
- Higher rates for health conditions
- Policy delivered by mail
8. New York Life
You could front-load your premiums with one of New York Life’s whole life products. You could pay enough up front to avoid paying premiums during retirement.
New York Life is the oldest life insurer in the nation. Like MassMutual and Northwestern Mutual, policyholders can receive dividends.
If you’re looking for a tradition of financial strength, you’ll find it with New York Life.
- Dividends possible
- Front-loaded premiums option
- No online quotes
- No 30-year term policy
SBLI offers speedy application turnaround time – but has limited online functionality.
If you don’t have any medical issues, your application will be processed quickly. SBLI offers competitive underwriting for people with hypertension, family history of gender-specific cancers, and anxiety.
You can update address and payment info online – but everything else requires a paper form. SBLI, once a trailblazer for simplifying life insurance, is working to modernize its process.
- Fast-track process
- Good for specific health conditions
- Limited digital functionality
- Policy delivered by mail
10. Principal Financial
Another model for financial stability among the nation’s largest life insurance companies, Principal offers great term and permanent policies with affordable premiums.
Give Principal Financial a close look if you want a large policy and you’re in excellent health. You could get your application approved in just 15 days. Principal also has strong options for people with medical conditions, but it’ll take longer to get approved.
For now, this carrier still depends on the USPS to deliver policies, policy changes, and statements.
Along with insurance, Principal offers other financial products, all with good grades from the rating agencies.
- Competitive policies for healthy applicants
- Great for longer-term policies
- Fast approval
- Policy delivered by mail
- Can’t update beneficiaries online
11. Mutual of Omaha
Mutual of Omaha excels in coverage for people with complex medical conditions.
Policies let you maximize your accelerated death benefits — a portion of your coverage you could access after being diagnosed with a terminal illness.
I wouldn’t suggest applying with Mutual of Omaha if you smoke. The company’s underwriters tend to have an absolute view on tobacco.
- Competitive underwriting for health conditions
- Award-winning employer (Forbes)
- Not great for tobacco users
- Slower application process
12. Lincoln Financial Group
Lincoln Financial Group is more expensive than most of the other providers I’ve listed – but it is a worthwhile option if you have a medical condition.
The company offers competitive underwriting for several substantial health conditions. And with an average approval time of 20 days, you can get coverage quickly.
You can also personalize your policy with a varied range of riders, but like many legacy carriers, Lincoln does most of its business through the mail.
- Competitive rates for people with medical conditions
- Selection of riders available
- Quick approval
- Mostly offline
- Longer-than-average application
13. State Farm
This huge company has brand recognition online, on TV, and probably in your neighborhood — but mainly for its homeowners and auto insurance. State Farm sells a wide variety of life insurance products too, earning A++ ratings from A.M. Best.
State Farm’s variety of life insurance policies can overwhelm online shoppers who aren’t quite sure what to buy. Visiting one of State Farm’s 18,000 local insurance agents can help you decide.
Your customer service experience will depend on your local agent, too, so be sure you pick someone who responds to your questions.
- Wide variety of policy types
- In-your-neighborhood approach
- Online access to policy
- Customer service depends on the agent
- Size of the company can be overwhelming
14. Prudential Financial
Prudential Financial is one of the best life insurance providers for people with complicated medical histories (like cancer or diabetes).
To access this coverage — which tends to be more expensive than rates with other providers on this list — you’ll need to call Prudential’s customer service reps.
- Living needs benefit
- Award-winning insurer
- Quick turnaround
- More expensive than other providers
- Phone interview during application
15. Brighthouse Financial
Brighthouse Financial is a new name for a traditional insurance carrier, MetLife.
MetLife still exists, offering plenty of other types of insurance including group life through employers. But Met sells personal life insurance through Brighthouse.
Brighthouse offers short and long-term policies, from 1 to 30-year term life insurance coverage. But they do not offer products with coverage less than $1 million, so if you’re looking for a smaller policy, you’ll have to shop elsewhere.
- No surrender fees
- Fast-track option for those without complex health histories
- $1 million+ term policies
- Only $1 million+ term policies
- Apply online, but decision by mail
- No variable or indexed universal whole life policies
- No direct to consumer option: you need to work with a financial planner or agent
16. Pacific Life
Pacific Life provides a full range of life insurance policies and has a strong customer service track record.
You can get great rates if you have a strong credit score. Pacific isn’t so great with complex medical histories.
- Easy, short electronic application
- Policy delivered by email
- Many tasks can be performed online: update address, beneficiaries, etc
- No online policy cancellation
- Need excellent credit
Nationwide Insurance offers stability, simplicity, and variety. You could buy term, whole, universal, or variable life coverage.
Nationwide also has a wide range of life insurance riders, making it among the most flexible top life insurance companies.
- Solid financial strength ratings
- Good customer service
- Lots of choices for policies
- Flexibility within specific policies
- Online customer service limited
18. John Hancock
John Hancock Life Insurance has a century and a half of writing policies and paying death benefits. It’s among the most stable and best rating companies in the nation.
The coverage itself has excellent financial strength ratings, but cumbersome customer service has kept this provider out of the top 10.
- Highly rated coverage
- Financial stability
- Variety of policy options
- Sometimes has favorable underwriting for diabetes
- Slower, paper-based customer service
- No temporary coverage while you wait to finalize a policy
You can find about a dozen life insurance options all in one place on Policygenius, one of the best quote aggregators on the web.
You could think of Policygenius as an insurance agency that ineracts with clients only online. Just submit your application and analyze the quotes the service shows you. When you select a quote you’ll be working with the insurer you chose.
Policygenius can make shopping for coverage easier which explains its growing market share over the past several years.
- Makes comparing policies easier
- Simple and easy to use
- Great educational content
- Also works for other kinds of insurance
- Excludes several leading life insurers
- Not great for people with health conditions
How Does Life Insurance Work?
No matter how simple or complicated your coverage gets, life insurance eventually boils down to this basic trade-off:
You Pay Premiums:
- “Premium” is insurance-speak for the cost of your life insurance. By paying your premiums you keep your coverage active.
You Get Coverage:
- In exchange for keeping your premiums up to date, your survivors could claim your policy’s coverage amount if you died. Insurers call this tax-free payout your “death benefit.”
Insurance companies base premiums on your age, health, occupation, and hobbies — along with the kind of insurance you buy.
Do You Even Need Life Insurance?
When life insurance gets confusing, some frustrated shoppers ask themselves, do I even need life insurance? I’ll answer that question with another question: Does anybody rely on you financially?
Life can be fuller when someone depends on you. Maybe it’s your spouse or your kids, or maybe it’s your business partner.
You never want to let this person down, and that may be why you’re shopping for good life insurance today.
Life insurance can help you continue building financial freedom for the people you care about even if you die unexpectedly.
But what if you’re just out of college and you have no debts and you don’t expect to have a family anytime soon? In that case, life insurance doesn’t need to be on your to-do list right away.
When somebody you love depends on you financially, getting life insurance is just the right thing to do.
What About Mortgage Life Insurance?
If you’ve ever bought a house you’ve seen the ads in the mail for mortgage life. These policies will pay off your home if you died with a balance on your mortgage.
There’s nothing wrong with mortgage life insurance, but you can get a lot more for your money with term life.
Not only can you get more coverage for less, but you can get more flexibility. Your mortgage life policy would pay your lender, not your beneficiary if you died. If you had a smaller mortgage balance, this coverage would have even less value.
So as you pay off your home, your policy has less value — but your mortgage life insurance rates will stay the same.
What If I Already Have Life Insurance from Work?
Many employers offer group life insurance as a benefit. You should opt-in, especially when you can do so at no extra cost.
However, this kind of coverage has its limits. Your coverage amount will be low compared to a personal life insurance policy.
Plus, staying covered depends on staying employed with the company. If you changed jobs, you’d lose the coverage.
What’s The Best Type of Life Insurance Coverage?
This is one of the first questions to ask when you’re shopping for coverage: What kind of life insurance should I buy?
Life insurance comes in a lot of shapes, sizes, and flavors, but you can still categorize every policy in one of two ways.
- Term Life: Term life coverage has an expiration date. When your term expires, so does your coverage — unless you renew at a higher premium, convert coverage to a whole life policy, or buy a new term policy.
- Whole Life: Whole life insurance, or permanent, life insurance has no built-in expiration date. Whole life also slowly gains cash value you can leverage later in life.
Term Life Insurance
Term life policies almost always cost less than permanent life insurance policies.
Term policies normally last 10, 20, or 30 years instead of the rest of your life. This helps drive premiums down.
Yes, the policy will expire in a couple of decades. But in the meantime, you can create your own financial independence which means you won’t need as much life insurance protection when your term policy expires.
Learn More: Read our post on the Best Term Life Insurance Policies of 2020.
Whole Life Insurance
Why is whole life insurance more expensive? Aside from its permanence, this type of life insurance costs more because policies gain their own cash value over time.
In a sense, a whole life policy works like a savings account or even an investment. Rather than “renting” term coverage for a specified length of time, whole life policyholders gain “ownership” of their coverage.
You can’t simply withdraw cash from your whole policy, but you could borrow against its value or surrender the policy and claim the cash. You could also donate the policy and its cash value to someone else.
The way a whole life policy’s cash interacts with its death benefit is a topic all its own. This interaction introduces a new family of life insurance types.
Types of Whole Life Insurance:
- Regular Whole Life: Cash builds slowly as it would in a savings account.
- Variable Life: With variable life insurance, you can invest your policy’s cash into insurance company-managed mutual fund accounts. Your cash could grow more quickly in good market conditions. The account could also lose value in bear markets.
- Universal Life: Built-up cash interacts with the death benefit and premiums in a universal life policy. The cash value, once it builds, can be used to change the death benefit or the premiums.
- Variable Universal: Built-up cash can be used to change the death benefit or the premiums — and the cash could grow faster because it’s invested in mutual funds managed by the insurer. (Account could also lose value.)
- Indexed Universal: Built-up cash is flexible — and cash can grow (or decline) along with a stock index such as the S&P 500.
These kinds of whole life policies should be part of your broader plan for financial independence. I recommend asking a certified financial planner for advice.
Some people think of whole life policies as retirement accounts because the money can build up tax-free since premiums were paid with after-tax earnings.
But most people should keep it simple and buy term life coverage for the most efficient protection.
Life Insurance Medical Exam
Most of the time, your insurer will ask you to take a health exam before finalizing your coverage.
This exam includes blood and urine analysis, a height and weight check, and a blood pressure check.
Life insurance health exams take time to schedule. They can be a little awkward. And, of course, they include a needle. So people like to avoid them when possible.
But here’s the thing: For most applicants, your health exam unlocks the lowest premiums — assuming you’re healthy. If you skip the exam because it’s inconvenient, you could pay thousands more for coverage.
If you’re not completely healthy, no-exam life insurance could be your best option.
No Exam Life Insurance
With most providers, shoppers can choose from three kinds of no-exam life insurance:
Instead of a health exam, you’ll answer a thorough questionnaire about your health and your family’s health history.
Underwriters will check a pharmaceutical database to confirm your current and previous prescriptions. They can also find results from any previous life insurance health exams and see your driving record.
Simplified issue policies can’t rival medically underwritten insurance when you compare coverage amounts. Most companies cap benefits at $350,000 to $500,000. You could possibly find $1 million in term life coverage with simplified issue.
You’ll get a brief questionnaire when you apply, but just about anybody can get approved unless you have a terminal diagnosis or need total care.
Expect to wait two or three years before the full coverage amount becomes available. If you died a few months after buying coverage and had paid premiums to date, your beneficiary would have no access to the coverage. (They could get a refund of your premiums.)
Guaranteed issue policies max out around $25,000, though it’s normally possible to find $40,000 to $50,000. Premiums are significantly more expensive than a medically underwritten term coverage.
These whole life burial insurance policies exist specifically to help pay your final expenses such as funeral or burial costs. They provide a small amount of coverage but usually cost less than guaranteed issue insurance.
No-Exam Medically Underwritten
Traditionally you could not get medically underwritten rates without taking a medical exam to confirm your good health.
Over the past several years at least two companies have started offering this option, thanks to more thorough online database checks.
If you’re older than 45, you won’t qualify. If you’re younger than 45 you may not qualify, especially if your health history isn’t totally pristine.
But if you can qualify, it’s a sweet deal: a large, affordable policy without the medical exam. Bestow Life and Haven Life — both on my “best” list above — offer this kind of coverage.
How Much Coverage Should I Get?
Your ideal amount of life insurance coverage you need will depend on your specific situation:
- Millennials or Gen Xers With Young Children: Unless you have large assets other than your ability to earn income, consider getting a large term life insurance policy with 7 to 10 times your annual income. Chances are your beneficiary would need this coverage to keep paying the mortgage and keep saving for the future if you died.
- Gen Xers or Younger Boomers with Grown Children: You may no longer need a large coverage amount. Consider a universal policy that can gain flexible cash as you age.
- Boomers or Older: If you depend on assets more than income, you may not need coverage anymore. Or you may want $25,000 to $50,000 in final expense coverage to pay off small debts or provide liquid assets as your heirs settle the estate.
- Life Insurance for Business: If you’re a business owner or a partner in a company, it’s a good idea to consider using life insurance to fund a Buy Sell Agreement. If a partner died, the insurance payout could keep the business afloat while you regroup. The money could buy out the deceased partner’s share of the company, too.
Regardless of its purpose, your life insurance death benefit should be large enough to do its job:
- For income replacement: You’ll need a larger policy, and term life will probably be key to making it happen.
- For estate flexibility or final expenses: You’d need a smaller amount of coverage, and a whole life policy would probably be best since it never expires.
- For business purposes: Get a policy large enough to reflect the value of your business partner’s share of the company if possible. Whole or term can often work here.
What Factors Set Your Premium?
How much does it cost to protect your family with life insurance? The answer varies widely based on your life and the type of insurance you need.
Premiums can range from $8 or $10 a month to $300 or $400 a month or more. These factors will make the difference:
Details About Your Policy
The kind of life insurance policy you need will have a big impact on costs.
Life Insurance Policy Options to Consider:
- Whole or Term: As I said earlier, term life can provide a lot more coverage for less if you need simple coverage. Longer terms almost always cost more than shorter terms.
- Coverage Size: This one’s a no-brainer. More coverage almost always costs more than less coverage. I say “almost always” because unusual amounts sometimes cost more. You may pay a little more for a $485,000 policy than you would for a $500,000 policy.
- Type of Underwriting: A medical exam confirms your health and can lead to lower premiums. No-exam coverage costs more if you’re healthy.
- Riders: Riders add extra features and flexibility to your policy for an added cost. A return of premium rider, for example, could refund all your premiums at the end of your term — assuming you outlive the term.
Details About You
Details about your life affect premiums in big ways, too. Applicants who present greater risk of an early death will pay higher premiums.
Personal Details Include:
- Your Age: Younger applicants will usually get lower premiums. Locking in a low premium now, based on your current age, could save money for decades.
- Your Health: Healthier applicants should get lower premiums. You’ll hear a lot about no-health-exam policies. These are convenient but will cost a lot more if you’re healthy since underwriters know so little about your health.
- Your Health History: Your health history and the health history of your family members will influence rates. A trend of serious health diagnoses for several generations could inflate your rates.
- Tobacco Use: Smokers often pay four to five times more for a policy.
- Your Gender: Males typically pay higher rates than females for the same coverage.
- Your Occupation: More dangerous jobs such as roofing or high-rise construction will prompt higher premiums because, once again, your risk of mortality exceeds the risk of a stay-at-home parent or computer programmer.
- Your Location: Each state regulates insurance companies differently; costs vary from state to state.
- Other Details: Your driving record, your credit score, your prescription drug records — these and other factors give insurers a more nuanced assessment of your life and its inherent risks. Higher risks prompt higher premiums.
In short, the higher your risk of death, the more you’ll pay for life insurance.
The good news: Once you have coverage, your premiums will remain fixed, unless you buy a policy designed for fluctuating premiums.
Special Underwriting Needs
Since your risk of mortality directly impacts your life insurance eligibility and premiums, health problems will almost always lead to higher rates.
But it’s too complicated to say, “Use this life insurance company if you smoke.” How much you smoke, whether you just quit or quit a couple years ago, whether you smoke and have other health factors such as high blood pressure — all these and many other variables create your own unique needs.
In these cases, I recommend reaching out to an independent life insurance agent in your area. Independent agents can work for you instead of working for a single insurer. Agents can find the best company to match your unique needs.
Life Insurance Riders
No matter which company you choose, you can modify your coverage with riders. Riders are add-ons to make your coverage more flexible. You’ll have to buy riders when you buy the policy and not after. So there’s some guess-work involved.
Common riders include:
- Accelerated Death Benefit Rider: Lets you access your benefit before death during a qualifying medical crisis such as a terminal illness diagnosis. You could use the money to pay for expensive health care.
- Return of Premium Rider: When you outlive your term, your coverage expires. This expensive rider could refund all the premiums you paid for the coverage at the end of your term.
- Waiver of Premium Rider: This rider lets you keep your coverage — for a while — even if you can’t afford your premiums because you were injured and can’t work.
- Guaranteed Insurability Rider: This rider let’s you adjust your policy’s benefit later in life without going through underwriting again. This is valuable because your health could change later, making it harder to get covered. (Whole policies only.)
- Child Term Rider: You could extend part of your coverage to one child — or sometimes multiple children — with a child term rider.
- Long-Term Care Rider: This rider lets you unlock some of your policy’s death benefit to use on long-term care if you need it.
Most insurers offer these common riders. Some companies offer a few riders for free. Accelerated death benefit riders tend to be among the most common free additions.
But riders normally add significant costs to your premiums which inspires the question: Are riders worthwhile?
You have no way to know whether you’ll eventually use a specific rider. So I recommend taking it easy here. Focus more on building your own financial independence so you can create your own solutions to the problems riders can help solve.
But if you think a rider would add the flexibility you really need, go for it. Just be sure you’re getting the best price and taking advantage of free riders when possible.
What Do Life Insurance Company Ratings Mean?
Since we can’t compare life insurance products the way we’d compare groceries or electronics, we need another way to quantify data.
Life insurance credit ratings can help. You’ve already seen references to A.M. Best in this post. You can also check Moody’s, Standard & Poor’s, and Fitch Ratings all of which analyze the health of life insurers and issue grades.
These grades look like grades in school, for the most part. As are better than Bs and Cs, for instance. These ratings agencies grade only financial strength. They do not reflect customer satisfaction.
Check with the Better Business Bureau, Trustpilot, or Consumers Advocate to see customer reviews. J.D. Power also rates life insurance companies on their customer service.
|New York Life||A++||AAA||Aaa||AA+|
|Mutual Of Omaha||A+||N/A||A1||A+|
|Lincoln Financial Group||A+||A+||A1||AA-|
So what does an A or A+ really mean? It means the insurance company balances its income with its potential exposure to prevent losses.
Solid grades do not mean an insurer will always be impervious to financial instability. Grades can’t guarantee you’ll get the best coverage for your needs.
These grades do offer a snapshot of an insurer’s health this year. This snapshot can help you assess a company’s likely health in the future.
Insurance companies and agents talk a lot about their ratings because letter grades offer a tangible way to compare insurance companies. As consumers, we crave tangible ways to measure quality.
But most consumers won’t notice a huge difference between an A++ and an A+ or even an A-rated company.
What Happens If My Insurer Goes Bankrupt?
All this talk about company ratings can give consumers the idea they would suffer if they chose an inferior life insurance company — that their company might go bankrupt and become unable to pay claims.
You should consider the health of your insurance company before buying a policy. But you don’t have to feel responsible for assessing the financial health of an insurer decades into the future.
In reality, consumers have safeguards against losing their life insurance coverage in a bankruptcy:
- State Oversight: State insurance commissions require insurers to have a healthy ratio of revenue to potential exposure.
- Reinsurance: Insurance companies have their own insurance which they call “reinsurance.” If your insurance company faced a bankruptcy proceeding, other insurers should, collectively, be able to pay your claim.
- Guaranty Associations: Life insurers watch each other’s backs and on-load your policy if your company can no longer sustain it.
You should still look for quality life insurance at an affordable price, but it’s not all on you to prevent a big loss.
How To Compare Life Insurance Quotes
By now you know enough to start shopping for life insurance quotes. Your first quote is almost never your best quote.
Tools like the quote box on this page can help make this process easier. You can enter your information and see prices from a variety of leading companies.
As you compare quotes on your own, make sure you’re comparing the same kind of coverage options with each insurance company.
And remember your quote will not always mirror your actual premium. Quotes provide an estimate — a nice starting point. The actual underwriting process may discover new information that increases or decreases your premium.
What About Modern Features?
The policy with the lowest premium may not always be your first choice for coverage.
You may be willing to pay a little more for features such as online life insurance applications, online management of beneficiaries, and the ability to pay your bill online.
The Internet has also changed the way some companies sell insurance. Recently, even the underwriting process has become more automated. Best companies like Haven Life, Ethos Life, and Bestow Life can check your health data without requiring a health exam.
These kinds of advances have made getting coverage quicker and easier for many people.
How Does My Beneficiary Get The Money?
No matter what kind of coverage or how many riders your policy offers, your policy will need a beneficiary. Your beneficiary could file a claim and receive your coverage if you died with the policy in force.
Typically you’d name your spouse or grown children as beneficiary. You could also name a business partner or even a lender if you’re using life insurance as collateral for a loan.
To file a claim, your beneficiary would need to submit a copy of your death certificate. Most policies have a two-year contestability period which means your insurance company will look closely at the cause and nature of your death to make sure the coverage applies.
And most policies have exemptions which could prevent your beneficiary from receiving the money. Suicide, for example, tends to be an exclusion for most carriers within the first two years of coverage.
Most of the time, insurance companies want to pay out your policy’s coverage. Companies must pay interest on unpaid benefits.
What Can Your Beneficiary Do with the Money?
The money your beneficiary would receive is tax free and has no strings attached. Your beneficiary would use the money on living expenses, to pay off the house, pay off all the credit cards, or to save for the future.
Ultimately the money should replace the earnings you would have made over the next five to 10 years, especially if you’re young and healthy and depend on your earnings from work for your family’s survival.
One of the best things about life insurance is its flexibility. Your beneficiary could use the money as needed. You could even leave directions in a will or estate plan.
How Do Life Insurers Make Money?
So far we’ve talked about your needs and how to find the best life insurance company for you and your family.
This makes some people ask: How can life insurance afford to pay millions of dollars in benefits? How can they keep making money and offering policies?
Not all life insurance companies make a profit. A company with the word “mutual” in its name may divide profits among policyholders.
But most life insurance companies do seek profit. Insurers make money by investing the premiums you pay and by limiting their likelihood of paying out a huge benefit through responsible underwriting.
Insurers also make money if someone stops paying on a policy which entirely eliminates the company’s obligation to pay the death benefit.
And, they make money on term policies when the term expires before the policyholder dies.
How Does Life Insurance Fit Into Your Financial Plan?
As you think about building your overall financial stability and freedom, life insurance may not seem to fit into the equation.
Term Life Insurance and Your Financial Plan
Term life insurance isn’t truly an asset. Your coverage won’t endure and grow. You don’t even really own it.
Term life is simply a contract between you and your insurance company. You agree to pay premiums and in exchange, your insurer agrees to follow its own rules about paying your beneficiary (if you died).
So what does term life really offer as you seek a more stable financial future?
In short, term life offers an umbrella. Umbrellas are a temporary shelter. They’re not a permanent solution to stormy weather.
In the same way, term life insurance gives you access to a temporary shelter which serves two purposes:
- More Freedom For You: If you’d like to work hard and invest your money in a variety of ways to build your own financial independence over time, your life insurance policy can offer some protection while you do so. Without a larger term-life policy, you’d probably choose to be more guarded with your money in case something terrible happened.
- More Freedom for Your Family: If the worst did happen and you died, your family would not have to re-think their entire financial future while they also tried to recover from the shock of losing you. They wouldn’t have to sell the house or tap into the college savings just to pay the bills. Your life insurance payout would give them some time to make the best decisions.
One of the best things about term life relates, once again, to its temporary nature, just like the umbrella. When the sun comes back out, you can put away your umbrella.
The same is true for term life. If you buy a 20-year term policy, for example, you’re giving yourself 20 years to build your own financial house that could withstand even your death.
And if you get ahead of schedule and no longer need coverage after 10 years, you can cancel your policy early.
Whole Life Insurance And Your Financial Plan
Whole life is a different kind of product. You can eventually own your coverage, and it can fit into your larger array of financial assets.
On its own, whole life of any type doesn’t perform all that well as an investment vehicle. Yes, you can invest your policy’s value into mutual funds or have it track a stock index.
But you’ll have much more freedom and flexibility to invest money without the constraints of your whole life insurance policy. And, you could access your funds much more easily, if needed, when they’re part of a separate investment account.
That being said, permanent life insurance has a nice tax advantage that could enhance your retirement planning: Since you pay premiums with after-tax dollars, your life insurance’s cash value can grow tax free.
But unless you’re already maxing out your IRA contributions and your 401(k) or equivalent fund, you’ll usually get better results maximizing those avenues first.
I enjoy discussing these kinds of topics on this blog, but there’s no substitute for working with your own financial planner who can help you asses your specific needs and find the right products — life insurance or otherwise — to help grow your financial freedom.
Where Did Life Insurance Come From?
In the context of the insurance industry, life insurance is unique. Unlike a car or a home, you can’t measure the monetary value of a life and insure against that value.
Historians can trace the idea of life insurance to Ancient Rome. Roman citizens could join a burial club whose fees helped pay other club members’ funeral expenses.
How does this ancient practice connect with you as you shop for life insurance in the 21st century?
Ultimately you still have the same goal: To pay a small amount of money in exchange for access to a much larger amount of money that could help your loved ones if you died.
You owe it to yourself and your family to find the best coverage — the policy from the company that can offer you affordable coverage, modern features, and reliability.