If you are in a situation in which family members, such as children or a spouse, depend on you for financial support, you may wish to purchase a life insurance policy. This guide will cover all of the basics of life insurance including the types of coverage, costs, how it works, and reviews of the best insurance companies for different stages of life.
Whether you are a parent, veteran, senior, or single individual, this guide will provide you with the information to find the right insurance policy for your situation. If you’re already familiar with life insurance and want to compare the best companies, below is a summary of our top overall recommendations.
|Northwestern Mutual||New York Life||State Farm|
|Best For||Best Overall||Seniors||Parents|
|Learn More||Read Review||Read Review||Read Review|
Understanding Life Insurance
Life insurance policies are not one-size-fits-all, and there are many companies out there offering different types of coverage. Before signing onto a long-term (or lifetime) commitment to a policy, it’s important to understand monthly costs, benefits, and what type of coverage is best for you and your family.
What Is Life Insurance?
Life insurance is a contract between an insurance company and a policyholder, in which the insurance company will provide a payment to a designated beneficiary in the event of the policyholder’s death. Some life insurance policies also offer “cash value” savings, which provide financial benefits that can be used during the policyholder’s lifetime.
The main reason to consider purchasing a life insurance policy is that it provides a payout (known as a “death benefit”) to a designated beneficiary in the event of your death. If you are the breadwinner or a primary caregiver in your family, life insurance can provide your family with a source of replacement income should you die with an active policy.
While life insurance is available for people of any age or life stage, some of the people who may wish to purchase life insurance include parents with children under the age of 18, parents with special-needs adult children, seniors who wish to leave an inheritance or cover final expenses, and active or retired military members who want to ensure their families are protected in the event of their premature death.
There are two main categories of life insurance: term life insurance and permanent life insurance. While term life insurance expires after a certain period of time (the policy’s term), permanent life insurance offers lifetime coverage and also provides cash value savings. Permanent life insurance can be useful for certain financial situations, but their high costs make them unsuitable for most individuals.
How Does Life Insurance Work?
When an individual wants to purchase a life insurance policy, he or she will usually fill out an application with an insurance company, have a short phone interview with an insurance representative, and take a medical exam that will determine their eligibility for coverage as well as the cost of their monthly premium. Some types of life insurance will waive the medical exam requirement, which can be beneficial for older policyholders or those with pre-existing conditions.
After the application is approved, the policyholder signs a life insurance contract with the insurance company for a designated time period. Depending on the type of insurance policy, the coverage period can last for a set amount of time like 10, 20, or 30 years, or for a lifetime. The policyholder must pay a monthly premium in exchange for coverage. The policy remains in effect for the duration of the term specified in the contract, or for as long as the policyholder pays their premiums, whichever ends first.
The two main types of benefits offered through various life insurance policies are death payments and cash value savings.
While coverage and benefits vary for different types of life insurance, the main benefit of a life insurance policy is a guaranteed payout (or “death payment”) to a designated beneficiary after your death. When signing up for your policy, you will work with an insurer to determine what that death benefit will be (often $250,000, $500,000, or $1 million). The higher the death benefit, the higher the cost of your monthly premiums.
The beneficiary for your death payment should be an individual who has a financial interest in you, or a level of financial dependence on you. For example, a spouse, child, parent, or business partner may be designated as a beneficiary on your life insurance policy. Beneficiaries who receive the death benefit from a policyholder’s life insurance can use the money for anything they wish. Some expenses that life insurance can cover include housing costs, co-signed debts, transportation, education, child care, and funeral or burial costs.
You may also list a charity or nonprofit as the beneficiary. However, in some states, your spouse would need to provide consent in writing in order for you to designate a non-spouse or an organization as the beneficiary.
A major advantage of life insurance is that the death benefit passes directly to the beneficiary named on the policy, avoiding the time-consuming probate process or the distribution of your estate after death. However, this also means that it’s important to review your beneficiaries after major life events such as a marriage, a child’s birth, a divorce, or the death of your previous beneficiary. Another recommendation is to list a contingent beneficiary on your life insurance policy, in case the first beneficiary dies before you.
To receive the payout listed in the life insurance policy, the beneficiary must submit a claim and a copy of the death certificate to the insurance company. While there is no formal deadline for submitting the claim to the insurance company, it is best to do this sooner rather than later, especially for term life insurance which has an expiration date. Many insurance companies allow beneficiaries to fill out the required forms online. After the claim has been submitted, the insurance company will take between 30 to 60 days to review. Then the insurance company will send the payout to the beneficiary, either as a lump sum or through installments (also known as annuities) over time, depending on the terms outlined in the policy contract. Payouts issued through annuities may last for a specified amount of time, or for the duration of the beneficiary’s life.
While term life insurance policies only provide a death benefit, most permanent life insurance policies also accrue “cash value” savings. Every month, part of the premium goes into a designated tax-deferred cash value account that grows through investments.
Unlike a death benefit, which only goes into effect after the policyholder’s death, the cash value portion of a life insurance policy is only available for use during the policyholder’s lifetime. The policyholder may withdraw funds from the cash value account, take out a loan against it, or use the funds to reduce the amount of the monthly premium. If a policyholder decides to cancel the life insurance policy, they will receive the cash value amount minus any surrender charge.
Life insurance with a cash value account can be useful for high-income individuals who are looking for another tax-deferred savings option, but most people would be better off putting their money in a traditional 401k or IRA, which have fewer restrictions and generate better returns.
What Does Life Insurance Cover?
Thinking about what life insurance “covers” usually refers to the situations in which the insurer will pay the death benefit. Life insurance companies will typically release the death payment to the policyholder’s beneficiaries after the insured’s death, so long as the policyholder paid the premium for the duration of the contract. In most cases, life insurance will cover deaths that occur due to an illness, an accident, or natural causes.
Life insurance policies will also cover deaths due to suicide or murder, with a few exceptions. Most life insurance companies will deny claims if the insured commits suicide within two years of the policy’s start date. In addition, life insurance companies will not pay a benefit for a death due to murder if the beneficiary was found to be involved in the death.
Common Life Insurance Exclusions
Life insurance companies will not cover death benefits if the policy has expired or if the policyholder has stopped paying their premium. In addition, every state has its own rules for which life insurance exclusions are permitted, and the insurers themselves determine which exclusions will be part of your policy.
For example, most policies have a “contestable period” lasting between one and two years, as well as a “material misrepresentation” clause that lasts for the duration of the policy. During the contestability period, if the insurance company suspects that the policyholder lied or left out information on their initial application for coverage, they can deny a beneficiary’s claim. With the material misrepresentation clause, the insurer can deny a claim if the policyholder intentionally left out information (such as their smoking habits) that would have affected their ability to get an insurance policy in the first place.
Other types of exclusions involve deaths that occur while the policyholder is under the influence of drugs or alcohol, as well as deaths that occur due to participation in criminal activity. Some insurance companies will also deny claims for deaths that occur due to acts of war.
In some states, insurance companies may specifically exclude deaths that occur due to participation in dangerous activities, which may include flying in a private jet or participating in extreme sports like skydiving, rock climbing, or scuba diving. However, you can often have exclusions like these removed from the policy in exchange for a higher premium.
Life Insurance Riders
Life insurance riders are “add-ons” that can be purchased along with a life insurance policy to provide extra coverage for specific circumstances. Not all riders are available for all types of policies, so it’s important to check with the insurance company to determine eligibility.
A few common types of riders include:
- Guaranteed Insurability Rider: Guaranteed insurability riders enable the policyholder to increase the policy amount within the specified term without requiring an additional medical exam.
- Accidental Death Rider: An accidental death rider pays an additional death payment to a policyholder’s beneficiaries if the policyholder dies as a result of an accident.
- Waiver of Premium Rider: The waiver of premium rider allows the policyholder to stop making premium payments but still retain the life insurance policy if they become disabled and lose their source of income. However, it is important to read the terms and conditions of this rider carefully, since “disability” can have a strict definition that only applies to a complete, permanent disability. A separate disability insurance policy rather than a rider can offer more comprehensive coverage, since disability insurance also replaces lost income.
- Accelerated Death Benefit Rider (Living Benefits Rider): With an accelerated death benefit rider, a policyholder who is diagnosed with a terminal illness can use funds from the death benefit. A major benefit is that the money that you withdraw will be tax-free. The catch is that insurance companies will subtract the amount that the policyholder receives, plus interest, from what the beneficiaries receive when the policyholder dies.
- Child Term Rider: A child term rider is a low-cost add-on that provides the policyholder with a small death benefit (often $10,000) in case their child dies. This can be useful for covering unexpected funeral expenses.
- Long-Term Care Rider: Long-term care riders permit the policyholder to receive a portion of the death benefit every month to cover long-term care expenses, such as a nursing home or assisted living facility. This is often a good alternative to long-term care insurance, which tends to be more expensive.
If you are interested in purchasing a rider, you should do so when you purchase your base life insurance policy. While dropping a rider from your policy later is usually as simple as filling out a form, adding a new one might require you to take another medical exam. In addition, some riders may not be worth the extra cost. For example, an accidental death rider may not be worth it if you don’t have a dangerous hobby or job, and already have robust life insurance coverage with a policy amount that would support your family after your death. However, a long-term care rider or accelerated death benefits rider could give you peace of mind if you are concerned about the effect of your future health on your finances. Speaking with an insurance agent can help determine the right level of coverage for you.
Types of Life Insurance
Term Life Insurance
Term life insurance is the most basic and least expensive type of life insurance, and it is the best choice for most people. Term life insurance lasts for a specific period of time, or “term,” such as 10, 20, or 30 years. Term life insurance is a great option if you want to keep your monthly premiums low, but still want to offer financial protection to a beneficiary in the event of your untimely death. Term life insurance also represents the most common situation for policyholders, which is to provide financial protection for those who depend on your earnings (or care) for the period of time that you will be earning (or providing care). For example, working parents might take out a 20-year term policy to provide financial protection for their kids during the time period before the kids are financially independent.
Similarly, a spouse might take out a 30-year term policy to provide protection for his or her non-working partner during the period of time that the spouse would expect to be earning. Once that spouse reaches retirement and no longer earns, life insurance is no longer necessary since retirement savings would cover the surviving partner. Term life insurance benefits are always paid out to beneficiaries as a lump sum, rather than through installments or annuities.
Term life insurance is renewable after the term expires. However, since the policyholder will be older, it is likely that premiums will be much higher. Furthermore, if you were to pass away after the term expires but did not renew the insurance policy, then your beneficiaries would not receive a death benefit.
Some term life insurance policies are “convertible” to whole life insurance, if your situation changes and a whole life insurance policy would better suit you. However, this usually needs to be completed within a specified time frame, so it’s important to check your contract and speak with an insurance agent up front to ensure this is an option.
Whole Life Insurance
Whole life insurance is a form of “permanent life insurance,” which is designed to last throughout your lifetime. Every month, you pay a fixed premium, similar to term life insurance.
In addition to the death benefit that would be paid out to your beneficiary, part of your monthly premium will also go into a cash value account that you can use during your lifetime. The cash value account has a guaranteed rate of return, which enables your money to grow over time and on a tax-deferred basis. While you are still alive, you can withdraw cash from the cash value account, take out loans against the policy, or use the additional income generated to reduce the cost of your monthly premiums.
There are pros and cons to whole life insurance. One of the pros is that it provides another avenue for tax-deferred growth, with guaranteed returns. It also helps with estate planning for high-net-worth individuals who want to shelter their wealth from taxes. Beneficiaries to a whole life insurance policy may also be able to receive the death benefit as a lump sum payment or as annuities over time.
However, whole life insurance policies tend to be much more expensive than term life insurance. If you stop paying the premiums, you forfeit the coverage. And if your financial situation changes, you are unable to renegotiate the terms of the contract because the monthly premium is fixed.
In addition, some financial experts are strongly opposed to whole life insurance because the extra money spent on premiums could be directly used to invest in other sources, like a retirement or brokerage account. The cash value account is not as useful because it would need to be spent within your lifetime, otherwise it is forfeited to the insurance company after your death.
Whole Life Insurance vs. Term Life Insurance
Whole life insurance and term life insurance offer different benefits, and for most people, term life insurance is the better choice. Here’s a quick summary of the main differences between them.
|Term Life||Whole Life|
|Coverage length||Fixed Term||Lifelong|
|Monthly Premium Cost||Lower||Higher|
|Cash Value Account||No||Yes|
|Death Benefit Payout||Yes||Yes|
Universal Life Insurance
Universal life insurance is another form of permanent life insurance, providing lifetime coverage for the policyholder. It is more expensive than term life insurance, but its benefits include both a guaranteed payout to beneficiaries after your death and a cash value account.
Unlike whole life insurance, universal life insurance offers much more flexibility. More specifically, with universal life insurance you can change your coverage amount and the cost of your monthly premiums. Beneficiaries listed in a universal life insurance policy may receive the death benefit as a lump sum payment or as annuities over time, depending on the terms outlined in the contract.
Another major difference with universal life insurance is that the cash value account grows based on market interest rates, so the amount of interest you receive may fluctuate (or even decrease) over time. Some companies combat this by offering a minimum performance guarantee for the cash value component of the policy.
Other Type of Life Insurance
While term life, whole life, and universal life are the most common types of life insurance, there are a few additional types of policies to consider.
- Guaranteed Universal – Unlike most other forms of permanent life insurance, guaranteed universal insurance does not accumulate cash value. Instead, it usually has low, fixed premiums like term insurance, but it lasts for the policyholder’s lifetime.
- Variable Universal – Variable universal life insurance is a type of permanent life insurance that offers benefits such as a cash value account with multiple investment options, adjustable premiums, and a flexible death benefit. The “variable” component comes into play because policyholders may choose to invest their cash value in stocks, bonds, or a fixed account that generates guaranteed minimum interest rates-and the amount in the cash value account will increase or decrease depending on the performance of the investments.
- Indexed Universal – Indexed universal life insurance is a form of permanent life insurance that features both a death benefit and a cash value account. With indexed universal life insurance, the policyholder can choose whether to earn a fixed interest rate on their cash value account, or interest rate based on a stock market index like the S&P 500 or Nasdaq 100.
- Burial or Final Expense – A subset of whole life insurance, burial or final expense insurance offers a small death benefit for the policyholder’s beneficiaries. Although this insurance is often marketed as a good option for covering funeral or burial expenses, the death benefit is not required to be used for this reason.
- Guaranteed Issue – Guaranteed issue is a type of whole life insurance that a policyholder can sign up for without answering health questions or taking a medical exam. This type of policy is most suitable for people who have serious medical issues and would otherwise be uninsurable. The catch is that guaranteed issue life insurance has a two or three year waiting period, during which the insurer will not pay a death benefit if the policyholder dies due to factors other than an accident. However, if the policyholder dies during the waiting period, the insurer will reimburse the beneficiaries with the policy premiums, plus interest.
Life Insurance Cost
The “cost” of a life insurance policy refers to how much a policyholder would pay in monthly premiums. Notably, the cost of those premiums vary greatly depending on the type of life insurance policy, as well as the policyholder’s life expectancy based on age and medical background. Most life insurance companies recommend requesting a personalized quote to make a direct comparison between policies.
How Much Does Life Insurance Cost?
Term life insurance can cost as little as $15 per month. However, premiums range significantly based on factors such as age, gender, health, smoking habits, and the policy amount.
The most accurate way to determine life insurance cost is to speak to a life insurance agent or request an online quote. However, there are some factors that will increase the cost of life insurance. For example, older individuals will pay higher rates for life insurance because they are at a higher risk of dying. In addition, people who are smokers, in poor general health (high BMI or personal history of heart disease, cancer, or diabetes), or have a family medical background that includes cancer or heart disease are likely to pay more. Men also tend to have higher life insurance premiums than women because they have lower life expectancies, on average.
The type of life insurance matters too when determining the cost. For term life insurance, the longer the policy term, the higher the monthly cost. The monthly cost of whole life insurance can be up to 15 times higher than term life insurance.
Life Insurance Rates by Age
Below is a summary of the expected price ranges for 20-year term, 30-year term, and whole life insurance policies, broken down by age and policy amounts. The ranges are based on estimated quotes provided by Quotacy for non-smoking men and women with a healthy BMI and no history of cancer or heart disease. As you can see, the cost of monthly premiums increase significantly with age and with higher policy amounts.
|Age||Policy Amount||20-year term||30-year term||Whole life|
While a 30-year term policy tends to be between 1.5 and 2 times the cost of a 20-year policy, whole life insurance is significantly more expensive than both types of term policies. The difference in cost is because a portion of the premium through whole life insurance is allocated to the cash value account. A policyholder who signs up for a whole life insurance policy in their 20s can lock in lower premiums, but if the cash value account is not of interest, it might still be a more cost-effective option to stick with a low-premium term life insurance policy and then renew the policy after it expires.
Tax Considerations With Life Insurance
Is Life Insurance Tax Deductible?
Life insurance premiums are not deductible on a personal tax return. However, employers who offer life insurance as a benefit to their employees can deduct the cost of the premiums as a business expense.
Is Life Insurance Taxable?
Tax implications for life insurance usually refer to whether the death payment is taxable, or whether the cash value component of a policy is taxable. In most cases, the death benefits from life insurance are not subject to income taxes. That means when beneficiaries receive payments from the insurance company after the insured’s death, the payments will not count toward their gross income. However, beneficiaries may be subject to income tax on interest that has been accrued on the benefit. For example, if a beneficiary chooses to accept the death benefit as an annuity payment rather than a lump sum, any interest that accrues on the remainder of the benefit will be subject to tax.
As for the cash value component of a life insurance policy, the money within the account will grow on a tax-deferred basis. If you want to withdraw from your cash value, any amount that accrued beyond the cost basis of the account (the sum total of monthly premiums paid) will be subject to taxes.
How to Find the Best Life Insurance
There are plenty of insurance companies that offer life insurance policies. The most effective way to compare options is to get a quote from multiple providers based on the type of policy you are looking for (term, whole, universal, etc.) and your desired policy amount. You will also be able to see which riders are available for the policy. Some companies will allow you to request a quote online, while others may direct you to an agent.
How Much Life Insurance Do You Need?
A general rule of thumb for life insurance is that you should purchase a policy worth 10 to 15 times your annual salary. However, it is more helpful to determine your ideal life insurance coverage based on how much potential income your dependents would lose in the event of your death, minus the assets they would be able to draw upon after your death.
For a detailed calculation, multiple your annual salary by the number of years that you want to replace income. For a stay-at-home parent, you would instead calculate the financial value of the services provided, such as childcare and housework, multiplied by that same number of years. Then add any outstanding debts, such as a mortgage, as well as any anticipated expenses like funeral costs and a child’s college fund. After that, subtract assets that could be used to cover those expenses, such as savings accounts, retirement, investments, and any current life insurance policies.
For example, let’s say you make $50,000 per year and want to purchase a 20-year policy. Suppose you also have $150,000 left on your mortgage, expect to spend $100,000 on your child’s college education, and want to allocate $10,000 for a funeral. Those are the costs you would need to add up first: $50,000 per year times 20 years, plus $150,000, plus $100,000, plus $10,000. That’s a total of $1,260,000. Suppose also that you currently have a savings account with $100,000 and a college fund of $20,000. To determine the amount of life insurance you should get, you would subtract $120,000 ($100,000 plus $20,000) from the total amount you would need to cover all anticipated expenses ($1,260,000). That leaves you with $1,140,000. So you would likely want to purchase a 20-year term policy worth $1,140,000.
How to Compare Life Insurance Companies
Reviewing life insurance policies can be daunting, and the coverage options that matter the most to you will depend on several factors, including your motivation for getting life insurance, your age, and your health.
If you are interested in term life insurance, you will need to find a company that offers policies for your desired term length (10 years, 20 years, 30 years, etc.). If you think that you may wish to transition to a whole life policy in the future, look for companies that offer a convertible policy.
If you are looking for a whole life or universal life insurance policy, you will also want to know if the insurer offers a minimum performance guarantee for the cash value component.
The types of riders available are also a consideration for your life insurance policy. For example, if you have special health needs or are approaching retirement age, you may wish to look into a long-term care or an accelerated death benefit rider. Or if you want peace of mind that your life insurance will remain in effect even if you lose your source of income due to a disability, you might consider a waiver of premium rider.
Some life insurance companies will let you request a quote online, which is helpful for the initial stages of your research. Others may ask you to contact a local insurance agent to assist you in finding a policy. Some life insurance comparison websites, such as Quotacy and Policygenius, enable you to input your information and get estimated prices from different insurance companies. However, the final price of your policy would not be determined without going through the process of getting a medical exam and working with an underwriter. But comparing initial price estimates can help you narrow down to the policy you want.
Company reputation is also an important factor in choosing a life insurance provider. Organizations like the Better Business Bureau (BBB) and J.D. Power are helpful for gauging customer satisfaction. For life insurance in particular, the National Association of Insurance Commissioners (NAIC) offers insight into individual companies’ market share, including the value of direct premiums written, which will further underscore their positive reputation in the industry. The companies listed in this review are well-regarded by the BBB, NAIC, and J.D. Power.
Since a life insurance policy is either long-term or lifelong, you will want to ensure that the company you choose will be around for a long time. Some life insurance companies have been around for more than 100 years, which highlights their ability to weather changing times and economic conditions. Furthermore, when choosing a life insurance company, you will want peace of mind that the company would be able to pay out any claims. The best way to directly compare insurance companies’ financial health and outlook is to use ratings from the major credit rating agencies: AM Best, Moody’s, and S&P. All of the companies we selected score well with all three rating agencies.
Best Life Insurance Companies for Seniors
Seniors will pay a much higher premium than younger people when purchasing a life insurance policy, which means they may have additional considerations during the policy research stage. For example, seniors may have health issues that limit their insurance options or they may be older than the age restriction for some companies. Seniors may also wish to look into a life insurance policy that includes a long-term care rider or an accelerated death benefit rider.
Term life insurance can still be a good fit for seniors, especially a policy that is convertible to whole life insurance if the term period is almost over. Guaranteed universal life insurance or burial/final expense insurance are also relatively affordable options for seniors who want a policy that will outlive them. For affluent seniors looking to use a tax-sheltered death payment as part of the estate planning process, whole life or universal life insurance can be useful, too.
Based on the availability of riders, medical exam requirements, high age restrictions, and the variety of policies offered, some of the best life insurance companies for seniors are New York Life, Mutual of Omaha, Northwestern Mutual, and State Farm.
Best Life Insurance Companies for Veterans
Those who serve or served in the military may also have unique life insurance needs. For example, veterans who suffer from health issues or disabilities after leaving the service may have a difficult time getting a traditional insurance policy to protect themselves and their families.
Active military personnel receive low-cost term life coverage through Servicemembers’ Group Life Insurance (SGLI), and they are allowed to convert this coverage to a VA Veterans Group Life Insurance (VGLI) policy within 120 days upon returning to civilian life. However, coverage offered through VGLI is limited. VGLI only offers a term life insurance policy with a maximum amount of $400,000, and renewing the coverage in later years can be quite expensive.
Fortunately, there are many insurance companies that specifically cater their policies for veterans and active service members. A few of these insurers include USAA, Army & Air Force Mutual Aid Association (AAFMAA), and Navy Mutual.
Best Life Insurance Companies for Parents
New parents are likely to benefit the most from purchasing a life insurance policy because they are financially responsible for children, and because they are usually young enough to be eligible for lower premiums. Parents should purchase a life insurance policy either before starting their family or early within a pregnancy in order to lock in the lowest rates.
Term life insurance is usually the best choice for parents. It is recommended for parents to choose a term that covers the longest financial obligation (such as 30 years if the parents have a 30-year mortgage), or until they expect their children to be financially independent.
In terms of the policy amount, parents should choose a policy that will cover expected expenses for the child’s upbringing if one of the parents dies and can no longer bring in income. Parents may also want to account for additional expenses, such as funding a college education. Both parents should consider getting a life insurance policy, even if one is a stay-at-home parent, in order to ensure the most financial protection for their family. Remember that if the stay-at-home parent were to pass away, the surviving working parent would incur more costs in the form of childcare, house work, cleaning, and cooking. It’s also worth looking into a policy that is convertible to a permanent policy, in case the child has a disability and would be a dependent for life. Some parents choose to add a child rider to their life insurance policy in order to cover funeral costs if their child were to pass away.
Based on these criteria, some of the best life insurance companies for parents/families are State Farm, Northwestern Mutual, and Prudential Financial.
The Best Life Insurance Companies
Northwestern Mutual (Best Overall)
Northwestern Mutual offers a variety of term life, whole life, and universal life insurance policies in all 50 states. Riders such as waiver of premium and accelerated death benefits are offered too, though you would need to contact an insurance agent to determine what is available in your state and for your desired policy. To help individuals determine the appropriate level of coverage, the company provides an online life insurance calculator that asks questions about current expenses, income, assets, and debt. For maximum flexibility, Northwestern Mutual also allows policyholders to convert term life insurance to whole life insurance.
Northwestern Mutual does not publish its average policy prices online. However, its website states that individuals can get coverage for as little as $1 per day. The company website also says that term life insurance policyholders can opt to have the premiums stay the same price for the whole term, or start with a lower premium that increases over the years so that it’s more affordable at younger ages. Rather than offer an online quote engine, Northwestern Mutual connects customers directly with a local representative in order to determine a customized plan.
According to the National Association of Insurance Commissioners, Northwestern Mutual has the highest market share among life insurance companies, at 7.20 percent. In 2022, the company underwrote more than $13 billion worth of direct premiums. Northwestern Mutual is also well-known for its customer satisfaction. JD Power’s U.S. Life Insurance Study ranked Northwestern Mutual “among the best” for customer satisfaction, with an index rating of 794/1000. It also has an A- rating with the BBB.
Policyholders can be assured of Northwestern Mutual’s financial stability. The company has earned the highest financial strength ratings of any life insurance company we reviewed across the three major rating agencies: Moody’s (Aaa), AM Best (A++), and S&P (AA+).
Northwestern Mutual is the best overall life insurance company due to its strong financial health and its reputation for customer satisfaction. Northwestern Mutual’s emphasis on customization makes it an appealing choice for customers of all ages and stages of life. The company’s 163-year history is also a testament to its ability to serve policyholders over a long period of time.
New York Life (Best for Seniors)
New York Life offers term, whole life, universal life, and variable universal life policies in all 50 states. For some types of insurance, policyholders can add riders that are useful for older individuals, including a chronic care rider, living benefits rider, or a waiver of premium rider. Term life insurance from New York Life can also be converted to permanent life insurance.
New York Life is also an ideal choice for seniors because it shares a unique partnership with the American Association of Retired Persons (AARP). The AARP Life Insurance Program from New York Life expands access to term and whole life policies for seniors because neither requires a medical exam. Term life insurance through AARP lasts until age 80.
Life insurance policies are sold through New York Life agents, and there is no quote engine on the general New York Life website. However, seniors who wish to purchase New York Life insurance through AARP may receive an instant quote online.
The 2022 National Association of Insurance Commissioners report shows that New York Life has a 6.45 percent market share, the second-highest, and underwrote about $12 billion in premiums. According to JD Power’s U.S. Life Insurance Study, New York Life is also “above average” in customer satisfaction, with a rating of 775/1000. New York Life has a B- rating with the BBB.
New York Life has earned an A++ rating with AM Best, Aaa with Moody’s, and AA+ with S&P. The company has also been around for 175 years.
New York Life is an excellent option for policyholders of all ages, but especially for seniors. Features such as the chronic care rider and living benefits option cater directly to older policyholders. In addition, the AARP partnership reinforces New York Life’s commitment to serving seniors and making life insurance accessible without the need for a medical exam.
State Farm (Best for Parents)
State Farm offers an array of life insurance policies, including term life, whole life, universal life, and final expense insurance. State Farm’s term life insurance offers policies for 10 years, 20 years, or 30 years, with the option to renew the policy up to a maximum age of 95. State Farm offers coverage in all states, except Massachusetts.
State Farm’s life insurance coverage is designed with flexibility for families. For example, within the same term life insurance policy, you can also add life insurance coverage for a spouse or a child. Similarly, State Farm offers a Joint Universal Life Insurance policy, which is a type of universal life policy that covers two people and pays out the death benefit upon the death of only one of the insureds. A children’s term rider is also available.
Unlike many life insurance companies, State Farm allows you to get an initial quote online. While the price of a State Farm policy will vary depending on your individual circumstances, the company website states that term life insurance is available for as low as about $15–$20 per month.
State Farm enjoys a positive company reputation and healthy market share. Data from the National Association of Insurance Commissioners shows that State Farm has a 2.84 percent market share, making it one of the top ten life insurance companies in the U.S. Similarly, JD Power’s U.S. Life Insurance Study rated State Farm “among the best” for customer satisfaction, with a score of 839/1000.
State Farm has earned an A++ (Superior) rating from AM Best, and a highly respectable AA from S&P. These ratings indicate that State Farm has strong financial health and will be able to pay policyholders’ claims.
State Farm boasts strong financial health, a reputation for customer satisfaction, and tailored offerings for families. Its pricing transparency through a quote engine is also helpful for the initial research stage.
USAA (Best for Veterans)
Available for active and retired service members, USAA offers term life insurance policies as well as whole life and universal life. The term life insurance policies are usually offered in increments of 10, 15, 20, 25 or 30 years, and the company allows policyholders between the ages of 18 and 35 to increase their policy amount by $100,000 due to life changes such as getting married, buying a house, or having children. Policyholders can also add on coverage for a spouse or child.
Active military members are also eligible for a no-cost Military Severe Injury Benefit Rider, which provides an extra $25,000 in coverage for certain injuries suffered in the line of duty. In addition, USAA will waive premiums for policyholders who become disabled, if the policyholder pays a small fee upfront for this additional protection. Term life insurance policies through USAA are convertible to whole life insurance or universal life insurance, without requiring a medical exam.
USAA offers a quote request form online, but a military ID is required. The USAA website notes that policyholders can get term life insurance for as little as $12 a month, although pricing will vary based on different factors such as age, health, and tobacco use.
USAA has served military members, veterans, and their families for nearly 100 years. In fact, the company boasts a community of 12.8 million members.
USAA life insurance has earned an A++ (Superior) rating from AM Best, an Aa1 (Excellent) from Moody’s, and an AA+ (Very Strong) from S&P.
USAA is only available to active or retired military members, as well as their families. Their policies are designed with the military in mind, and coverage can adapt to the unique needs of a deployed service member as well as returning veterans.
Top 10 Life Insurance Companies by Market Share
|2||New York Life||6.45%|
Should you buy life insurance for children?
No. A dedicated life insurance policy for children is generally not worth it because no one is depending on them financially. The money that would have been spent on a monthly premium for life insurance could instead be used for other savings, such as a 529 college account. A more cost-effective option for insuring children is to add a child term rider to the parent’s policy, which pays out a small death benefit in case the child dies so that the parents can cover funeral expenses.
Can I get life insurance through my employer?
Many employers offer basic life insurance coverage as a benefit, often in the amount of 1.5 times your annual salary. However, this is rarely enough to provide that financial safety net for a family. Furthermore, most employer-sponsored life insurance coverage doesn’t carry over if you leave the company. That’s why it’s useful to purchase your own coverage, in addition to any benefits provided by your employer.
Does pregnancy affect life insurance costs?
Yes. Because a medical exam is usually required to obtain a life insurance policy, health complications resulting from the pregnancy could lead to higher premiums. If you are planning on starting a family, we recommend purchasing a life insurance policy before the pregnancy.
If you are already pregnant and purchased a life insurance policy, contact the insurer after one or two years to see if you can apply for a new policy or if the insurance company will lower your rates.
- Insurance Information Institute
- National Association of Insurance Commissioners
- JD Power
- Better Business Bureau
- AM Best
- Moody’s Investor Service
- Standard & Poor’s
- Dave Ramsey
- Northwestern Mutual
- State Farm
- New York Life
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