Best Life Insurance Companies for 2020

Life insurance — it’s a product, much like a pair of shoes or a tank of gas.

Except life insurance is abstract. We all know how to shop for shoes and gas. But how can we compare one life insurance company to another?

In this post, we’ll put your mind at ease about finding the best life insurance company.

First, we’ll share our research about the best companies. Then we’ll show how customizing your coverage can adapt life insurance to meet your specific needs while saving you money.

Whether you’re a Millennial, a Gen Xer, or a Boomer, the best life insurance coverage should meet you where you are.

Best Life Insurance Companies

Here are the top 13 life insurance companies for 2020:

CompanyBBBJ.D. Power ScoreA.M. Best Rating
Haven LifeA+751A++
AIGA+722A
Banner LifeA+N/AA+
ProtectiveA+754A+
BestowA+N/AA+
TransamericaA-732A
SBLIA+N/AA
PrincipalA+789A+
Mutual of OmahaA+795A+
Lincoln Financial GroupNR750A+
Prudential FinancialC-754A+
Brighthouse FinancialA+729A+
Pacific LifeA-765A+

The best life insurance companies do a lot of things well, but most companies have a few drawbacks, too.

As you look for your best option for life insurance, consider these details about each “best” company.

1. Haven Life

Haven Life has created a unique niche in the life insurance world.

Haven Life has become a household name in a few short years, but the company is actually an agency selling term policies for MassMutual, a legacy insurer.

Haven has simplified term life insurance — offering up to $3 million in coverage — for Millennial and Gen X shoppers.

Haven Life also takes pride in its online access to insurance. The healthiest applicants can even skip the medical exam and get affordable coverage — and that’s an uncommon combination.

Pros

  • Quick & easy application
  • Above-average coverage limits

Cons

  • Limited policy options
  • Only for the healthy

Haven Life provides a simple, no stress, all online application process making your life insurance policy shopping easier than ever. Compare Rates Now

2. AIG

AIG is an excellent option for Millennials because of how quickly they process applications. The company offers whole life, universal, and term policies with the option for non-standard term lengths.

AIG is a well-recognized and award-winning provider. In 2015, AIG scooped up four awards at Global Finance’s World Best Global Insurers awards.

While most other companies offer standard term lengths (10, 15, 20 years, etc.), AIG allows you to choose non-standard terms, such as 18 or 22 years, for example. It’s good to have that option.

With AIG, you can go from application to signed policy super quickly. You can also perform a variety of tasks online – from updating your beneficiaries to changing payment info. You’ll only need to phone to cancel.

Pros

  • Wide range of policies
  • Award-winning company
  • Faster-than-average approval
  • Non-standard term lengths

Cons

  • No online policy cancellation

Banner Life is an insurance option provided by Legal & General America. It’s a highly-rated life insurance company with a history of strong financials and superb customer service, but what really makes them stand out is its treatment of most health conditions.

With most companies, any health issue will automatically mean higher rates. But Banner Life classifies many of these same conditions under the rate profile of “good”, or even sometimes “excellent”.

That means that if you have certain medical conditions such as diabetes, high cholesterol or high blood pressure, Banner Life will likely offer you the most competitive rates.

They also offer a reconsideration feature to reduce premiums for former smokers who quit or plan to quit – which can really add up when you consider that most insurance policies last 20-30 years.

That said, if you have a medical profile clear of any of these, then Haven Life premiums will typically beat Banner Life, in our experience.

Like many of the modern companies, Banner Life offers the convenience of an electronic application and emailed policy – get insured without lifting yourself off the couch. The only thing you can’t do online is cancel a policy – you’ll need a notarized paper form.

Pros

  • Great for health conditions
  • Electronic application
  • Great customer service

Cons

  • No online policy cancellation

4. Protective

Protective was founded in 1907 and is now one of the highest-rated insurance companies in the U.S.

They offer a unique universal life insurance policy which is somewhat similar to a term life policy. It acts as a term policy at first, then converts to a permanent policy after the agreed term.

Protective’s coverage options for individuals with medical conditions may not be as great as what’s offered by Banner Life, but it’s still pretty good. What’s really unique about Protective, however, is their option for rate reconsideration after the first year of the policy.

That means that if your health improves, your policy can be reviewed and reconsidered. Any premium savings will definitely add up over the full term of the policy. That makes Protective a really good option for those who want to establish life insurance now while still working to improve medical conditions, such as high cholesterol or extra weight.

That said, their application approval is notoriously slow, so if you need life insurance now, Protective may not be your best choice.

Pros

  • Premium reconsideration feature for health markers that have improved
  • Short application form
  • Policy delivered by email

Cons

  • Slow approval

5. Bestow

Backed by North American Company for Life and Health Insurance, a financially strong & stable company, Bestow has quickly become one of the top options for affordable life insurance coverage.

Bestow has set out to simplify insurance. If you’re like most – finding all of the different types and riders and terms confusing – you’ll have a pleasant experience shopping with Bestow.

They offer 2-, 10- and 20-year term coverage only; however, there are several benefits that are enabled by their laser-focused offering:

Coverage is available for as little as $3 a month with nearly instant coverage for those who qualify. You can also change your policy anytime online.

Instead of a traditional underwriting process, Bestow uses information from your application and available data about you (with your permission) to decide whether you qualify and to set the price of your premiums.

Pros

  • Low rates
  • No medical exam needed
  • Fast application

Cons

  • No permanent or universal options
  • Only for ages 21 – 54

6. Transamerica

Transamerica stands out from other providers with its unique policy options that would be very beneficial in the case of a chronic or terminal illness. The company offers living benefits through term life products which you can access early in case of terminal or chronic illness.

You can select from a variety of income stream and lump sum pay-outs for beneficiaries.

While medical exams are not required for policies below $250,000, if you have certain health conditions (such as diabetes or high cholesterol), you may be issued a lower rating and pay higher rates.

Pros

  • Living benefits
  • Income protection options
  • No need for a medical exam

Cons

  • Higher rates for health conditions
  • Policy delivered by mail

7. SBLI

SBLI offers speedy application turnaround time – but has limited online functionality.

If you don’t have any medical issues, your application will be processed super 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, which seems a little outdated.

Pros

  • Fast-track process
  • Good for specific health conditions

Cons

  • Limited digital functionality
  • Policy delivered by mail

8. Principal

Principal offers insurance products in all 50 states and is great if you don’t have any health conditions – and want to take out a larger policy amount.

Receive coverage quickly and get your application approved in just 15 days!

Although they offer the best rates for healthy individuals, interestingly, Principal also offers good and excellent class coverage for people with medical conditions.

Principal does not deliver the same online experience as some of the other providers. For example, you’ll receive your policy by mail and you won’t be able to do things like update your beneficiaries online – you’ll need paper forms.

Pros

  • Competitive policies for healthy applicants
  • Great for longer term policies
  • Fast approval

Cons

  • Policy delivered by mail
  • Can’t update beneficiaries online

9. Mutual of Omaha

Mutual of Omaha is great for applicants with a range of health conditions. Policies include high benefits for accelerated death. This means that people who have been diagnosed with a terminal illness can access a portion of their policy’s death benefit while alive.

Mutual of Omaha is not the best option for smokers. If you smoke or use other forms of tobacco, you could get a lower rating and have to pay higher rates.

The application process could be a little speedier. In this area, Mutual of Omaha is outperformed by other insurers like Principal.

Pros

  • Competitive underwriting for health conditions
  • Award-winning employer (Forbes)

Cons

  • Not great for tobacco users
  • Slower application process

10. 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 with Lincoln Financial.

You can also personalize your policy with a varied range of riders.

You won’t be able to change any of your information online, so get ready for paper forms and calls with customer service agents. If you hate forms and think simplicity is key, you may want to look elsewhere.

Pros

  • Competitive rates for people with medical conditions
  • Selection of riders available
  • Quick approval

Cons

  • Mostly offline
  • Longer-than-average application

11. Prudential Financial

Prudential Financial is one of the best life insurance providers for people with complicated medical histories (like cancer or diabetes). In 2016, Fortune magazine named Prudential #1 Life or Health Insurance company. It was also named the World’s Most Ethical Company in 2015.

Prudential has a policy that makes part of the death benefit accessible if you have been diagnosed with an illness with a maximum life expectancy of 6 months or confined to a nursing home.

It’s important to note that compared to the other providers I’ve mentioned, Prudential life insurance rates are much higher. The application process also includes a phone interview with an underwriter – which many other providers don’t require.

Pros

  • Living needs benefit
  • Award-winning insurer
  • Quick turnaround

Cons

  • More expensive than other providers
  • Phone interview during application

12. Brighthouse Financial

Brighthouse Financial is the century-old brand MetLife, re-imagined. So while the name may be new to you, the company certainly isn’t.

MetLife still exists, offering other kinds of insurance such as policies built into employee benefit packages. But the parent company focuses on individual, consumer life insurance policies under the Brighthouse brand.

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.

Pros

  • No surrender fees
  • Fast-track option for those without complex health histories
  • $1 million+ term policies

Cons

  • 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

13. Pacific Life

Pacific Life was founded in 1868 and has brilliant A+ ratings from recognized insurer rating boards, such as A.M. Best and BBB.

They offer a variety of products, including term life, whole life, universal life (indexed and variable), and even life insurance with long-term care benefits.

Pacific Life falls short in its underwriting tables for several key health conditions. So, for those with substandard medical profiles, other companies will provide more competitive rates and products.

The company also offers several unique riders, allowing you to personalize your coverage. For example, they offer a Child Protection Rider, Disability income Rider, and Accelerated Death Benefit Rider.

Pros

  • Easy, short electronic application
  • Policy delivered by email
  • Many tasks can be performed online: update address, beneficiaries, etc

Cons

  • No online policy cancellation
  • Need excellent credit

What Do Life Insurance Company Ratings Mean?

Life insurance credit ratings help you measure the quality of a company.

A.M. Best, Moody’s, Standard and Poor’s, and Fitch Ratings analyze the health of life insurers and issue ratings.

These ratings resemble grades in school, for the most part. As are better than Bs and Cs, for instance.

CompanyA.M BestFitchMoody’sS&P
Haven LifeA++AA+Aa3AA+
AIGAA-A2A+
Banner LifeA+AA-N/AAA-
ProtectiveA+A+A1AA-
BestowA+A+N/AA+
TransamericaAA+A1AA-
SBLIAN/AN/AA-
PrincipalA+AA-A1A+
Mutual Of OmahaA+N/AA1A+
Lincoln Financial GroupA+A+A1AA-
Prudential FinancialA+AA-Aa3AA-
Brighthouse FinancialA+AA-Aa3AA-
Pacific LifeA+AA-A1AA-

But 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.

Grades just offer a snapshot of an insurer’s health. 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?

Focusing so much on life insurance company ratings implies consumers would suffer if they chose an inferior life insurance company — that their company might go bankrupt and be unable to pay a large claim, rendering their policy useless.

Yes, 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 Find Your Best Life Insurance Coverage

Life insurance company health ratings help identify healthy life insurance companies. Makes sense, right? But financial health should be an expectation as you shop — not just a bonus.

Ideally, all insurers you consider should have an A or better rating from A.M. Best and the other ratings agencies.

To put it another way: A solid health score can get an insurer into the conversation about “best life insurance companies” — but this rating shouldn’t be your sole determining factor.

Distinguishing the “best” company from a variety of healthy companies requires a slightly different perspective.

Rather than asking, “What are the best life insurance companies,” I suggest asking, “What is the best life insurance company for me?”

I’ll spend the rest of this post answering that question.

Haven Life provides a simple, no stress, all online application process making your life insurance policy shopping easier than ever. Compare Rates Now

Do You Even Need Life Insurance?

When life insurance starts to seem too complicated, many shoppers ask themselves do I even need life insurance? I’ll answer that question with another question: Does anybody rely on you financially?

I think we could all agree that life is better 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’s probably 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.

When somebody you love depends on you financially, getting life insurance is just the right thing to do.

Let’s keep learning about how to find the best coverage for you and how to customize coverage to make it fit your needs even better.

How Does Life Insurance Work?

No matter how complex your coverage gets, life insurance riffs off 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:

  • If you died with life insurance coverage in effect, your family, your business (or anyone else you named as the “beneficiary” of the policy) would receive your policy’s coverage amount. Insurers call this tax-free payout your “death benefit.”

Details about your life will help determine your policy’s premiums. The type of insurance you need will also be a huge factor as you choose the best company.

Historically, shoppers tend to value legacy insurance brands — names that have a century or more of household use.

But sometimes a newer company can offer exactly the coverage you need as you can see in my list of best insurance companies above.

What Factors Set Your Premiums?

How much does it cost to protect your family with life insurance? The answer varies widely based on a long series of variables.

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 we’ll see below, term life unlocks a lot more coverage for a lot less money out of your pocket. Longer terms almost always cost more than shorter terms. (Abnormally short terms such as 2- or 5-years may cost more than a 10-year term.)
  • Coverage Amount: 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: Medical underwriting shares details about your health with your insurer. When you’re healthy, you can access lower premiums through medical underwriting. No-exam underwriting relies on questionnaires and database checks. (No-exam coverage costs more because insurers accept more risk).
  • 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. Riders can add a lot of extra costs and you may never use them.

Details About You

Details about your life affect premiums in big ways, too. Applicants who present greater risk will pay higher premiums.

Personal Details Include:

  • Your Age: Younger applicants will usually have access to lower premium rates. So getting coverage sooner could save you a lot of money for decades because you’d be locking in the low rates you’re eligible for now.
  • Your Health: A medical exam will determine your body-mass index, your blood pressure, your cholesterol level, and other data which influence premiums. Healthy applicants should get lower premiums. You’ll hear a lot about no-health-exam policies. These are convenient but cost a lot more 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 history of serious health diagnoses could inflate your rates.
  • Tobacco Use: Smokers could pay four to five times more for life insurance coverage.
  • 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.

If you smoke, have a chronic disease such as diabetes or COPD, or if you work a more dangerous job such as roofing or law enforcement, insurers will charge more.

The thing is, all insurers have their own way of gauging your risk factor. If you’re a smoker, your best company may be a company with more nuanced underwriting for life insurance for smokers.

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 death 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 the length of your term life policy, your coverage contract 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 death 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 death benefit to cover 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.

Life Insurance Medical Exam

Gathering more data about your life lets insurers assign more accurate premiums for your coverage. To get the most accurate data, insurers will ask you to take a health exam.

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, when insurance companies say you don’t need a health exam to qualify for coverage, shoppers pay attention.

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.

But, if you’re not completely healthy, no-exam coverage may your best option.

No Exam Life Insurance

Here are the three different kinds of no-exam life insurance:

Simplified Issue

Instead of a health exam, you’ll answer a pretty 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; premiums will be higher than a larger term-life policy’s premiums.

Guaranteed Issue

You’ll get a brief questionnaire when you apply, but just about anybody can get approved unless you have a terminal diagnosis or live in a nursing home.

Expect to wait a year or two 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 still have no access to the coverage.

These 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.

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.

What’s the Best Type of Life Insurance Coverage?

Here’s one of the first questions to ask when you’re shopping for coverage: What kind of coverage 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.

Two Main Types of Life Insurance:

  • 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 whole life policies.

Term coverage’s built-in expiration date means the insurance company may never pay the death benefit. Term policies normally last 10, 20, or 30 years. This helps drive premiums down.

Shoppers looking for simple coverage to protect their families will get the most coverage from a term policy. It’s common to buy $1 million, $2 million, or more in life insurance coverage.

Yes, the coverage 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.

Whole Life Insurance

Why is Whole Life more expensive? Aside from its permanence, whole 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” life insurance coverage for a specified length of time, policyholders, over time, gain “ownership” of their whole life policies.

You can’t simply withdraw cash from a whole life policy, but you could borrow against the value, surrender the policy and claim a large chunk of the cash, or donate the policy and its cash value to someone else.

The way a whole life policy’s cash value works and interacts with its death benefit is a topic all its own that 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 a variable life insurance policy, cash value goes into insurance company-managed mutual fund accounts leading to a faster accumulation of cash 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. With 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.

What’s the Best Coverage for Your Generation?

Not sure what kind of insurance to buy? Your age may help you decide.

Real-life defies categories; any age-by-age guide to life insurance has its limits. But stages of life can inform decisions for a lot of people.

Life Insurance By Generation:

  • Millennials: Since we haven’t had as much time to save, and because we often have younger children, a lot of millennials need the large coverage amounts only a term life policy can provide. This coverage can protect our families from unexpected tragedies while we’re building our own freedom.
  • Gen Xers: The kids are getting older and the house may be almost paid off — plus you’ve had more time to build your own financial independence — so it may be time to transition to a smaller term policy or a whole life policy with an eye toward the future. If you got a term policy when you were a couple decades younger, it’ll soon expire, giving you a chance to reassess your needs for the future.
  • Boomers: Successful boomers may not need any life insurance coverage, or they may want a smaller policy to give their heirs some fluidity as they liquidate assets. Some boomers may want life insurance to use for legacy giving. Many term life policies will not be available to boomers because of age minimums. Older boomers may be interested in burial insurance which is basically a small guaranteed-issue policy.

How Much Coverage Should I Get?

Your ideal amount of coverage for your new life insurance policy will also depend on your specific needs:

  • Millennials or Gen Xers With Young Children: Unless you have large assets other than your ability to earn income, consider getting a large term 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: Consider a smaller simplified issue policy — or even a guaranteed issue policy if you’re in poor health. Neither will require a health exam. You may need only $25,000 to $50,000 in coverage to pay off final expenses or provide some liquid assets to help your heirs sell the home.
  • 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 payout 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.

How to Compare Life Insurance Quotes

Do you enjoy analyzing quotes and comparing life insurance companies? Probably not.

But your first quote is rarely your best quote. Many drivers with almost-empty gas tanks will drive an extra mile or two for a certain kind of gas. Why not do the same with life insurance?

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 keep in mind 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 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 many carriers.

Most of the time, insurance companies want to pay out your policy’s death benefit. 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, 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 death 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 death 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 Finacial 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 a death benefit (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, whole life 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 family 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.

Grant Sabatier

Grant Sabatier

Creator of Millennial Money and Author of Financial Freedom (Penguin Random House). Dubbed "The Millennial Millionaire" by CNBC, Grant went from $2.26 to over $1 million in 5 years, reaching financial independence at age 30. Grant has been featured in The New York Times, Wall Street Journal, BBC, NPR, Money Magazine and many others. He uses Personal Capital to manage his money in 10 minutes a month.
Grant Sabatier

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Posted in: Insurance, Life Insurance

2 Comments
    Chris Acker, CLU, ChFC
    Posted Aug 19 2019
    Hi Grant. Nice overview of some of the top life insurance carriers in the business. I find it interesting that you single out some of the carriers for offering "living benefits" for terminal illnesses- virtually ALL carriers offer this FREE rider on their life insurance policies. In fact, if you own and old policy, most carriers will add a living benefit rider to the existing coverage AT NO COST.
      Grant Sabatier
      Grant Sabatier
      Posted Aug 29 2019
      Thanks Chris. This is really helpful to know. I didn't realize that most carries would add it to an old policy. I appreciate you sharing.

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