Best life insurance companies, compared
| Company | Principal Financial Group | State Farm | Haven Life (MassMutual) | Banner Life / Legal and General America | Northwestern Mutual |
|---|---|---|---|---|---|
| Best for | Best overall | Best in customer satisfaction | Cheapest and fastest | Longest terms | Best for earning dividends |
| JD Power Customer Satisfaction Rank | 15 | 1 | 7* | N/A | 3 |
| Monthly premium* | $23.00 | $30.44 | $22.34 | $23.89 | $31.75 |
| Coverage terms | 10, 15, 20 or 30 years | 10, 20 or 30 years | 10, 15, 20, 25 or 30 years | 10, 15, 20, 25, 30, 35 or 40 years | 10 or 20 years |
| Death benefits | $200,000 to $5 million | Starting at $100,000 | $100,000 to $3 million | $100,000 to $10 million | $100,000 to $5 million |
| Can you buy a policy online? | No | Yes | Yes | No | No |
*This score is for MassMutual, which owns Haven Life.
What is life insurance and how does it work?
A life insurance insurance policy is like a contract, wherein you pay a monthly or annual premium in exchange for a payment, called a death benefit, that is made to a beneficiary in the event of your death.
Types of life insurance policies
There are two major kinds of life insurance. A term life policy covers a predetermined amount of time -- typically 10, 20 or 30 years. Permanent life insurance, of which there are a few varieties, covers you until the end of your life.
Term life
This type of life insurance, which covers a set number of years, is ideal if you're looking for coverage for a discrete period of time -- while your children are dependents or you're paying off a mortgage, for example. One benefit of term life insurance is that it's typically much cheaper than permanent life insurance, so you may be able to get coverage at a lower price.
Once the term is up, the policyholder can walk away or sign up for a policy with new terms and conditions. Term insurance generally provides the highest level of financial protection at the lowest cost.
"If I need to make sure my family or business is protected in the case of my passing prematurely, I want to focus on term insurance," says David Gastwirth, an insurance strategist with American Business. "It's the fundamental cornerstone of one's insurance plan."
Death benefits for term life insurance typically range from $100,000 to $3 million, though some providers offer coverage up to $5 million. Gastwirth recommends erring on the side of more coverage since the cost of a life insurance policy increases as you age. It's also worth noting that it could be more difficult to get approved for coverage if you develop a health issue later in life.
Permanent life
Permanent life insurance covers you until you die -- as long as you pay your premiums. The type of insurance includes whole life, universal life or a combination of policies designed to provide protection for the entire life of the policyholder. Most of these policies include an insurance portion and an investment portion.
- Whole life insurance offers a death benefit as well as a "cash value account" that increases in value at a set rate over time. Your premiums and death benefit are fixed and do not change throughout the length of the policy.
- Universal life insurance has a cash value account that may accumulate over time. You can withdraw money or borrow against its value. With many universal life policies, your premiums are flexible and you can adjust the death benefit.
- Variable life insurance also has a cash value account that is typically invested in funds similar to mutual funds. With variable life insurance, the returns are determined by how well the investments perform. As such, these policies are riskier than whole or term life insurance policies.
How much does life insurance cost?
The cost of a life insurance policy -- and the pricing of your monthly or annual premium -- is primarily determined by your age, your health, the term length and the amount of the death benefit. Other factors that may come into play include gender, whether you're a smoker and where you live. Adults in good health under the age of 40 can expect to pay between $25 and $50 per month for a 20- or 30-year term life insurance plan with a death benefit of approximately $500,000.
Some experts recommend buying a policy with a death benefit equal to 10 to 12 times your annual income and a term long enough to cover living expenses and future financial liabilities, such as mortgage payments and college tuition.
What does life insurance cover?
Life insurance policies have a predetermined "death benefit" -- a sum of money that's paid out when the policyholder passes away. The beneficiaries of that money can use it for any purpose. Often, this may include funeral costs, unpaid financial obligations like a mortgage or a child's college tuition or medical bills.
Some companies sell hybrid life insurance policies that bundle long-term care insurance. If the long-term care isn't used, the unused value of that portion of the insurance shifts to the death benefit.
Who should get life insurance?
If anyone relies on you for financial support -- children, spouse or parent -- you should have life insurance.
Many people buy a policy around the time of a major life milestone. When you take on debt to buy a house or send a child to college, a policy can help ensure that your obligations are paid even if you die. A life insurance policy can also help your dependents manage living expenses as well as include final expense insurance for burial and funeral costs.
The best time to buy life insurance is when you're young and healthy, as it becomes more expensive as you age.
How to find the best life insurance policy and choose a carrier
The following steps can help you find the right life insurance carrier and policy for you.
1. Consider how much coverage you need -- and how long you'd like to be covered. An insurance agent can help you add up the financial expenses you'd like taken care of in the event of your death.
2. Decide whether you'd like to earn dividends and interest on your policy. If you do, you may want a whole life insurance policy.
3. Explore other special considerations. If you have a preexisting condition such as diabetes, you may want to look into options like guaranteed life insurance. Or, if you'd like coverage for medical bills in the event that you ever need long-term care, you may want to look into a long-term care rider.
4. Choose a policy type and carrier. First, make sure a carrier offers what you need. Then, consider your priorities: Do you want the best customer service, the most bang for your buck or a financially secure company?
FAQs
A rider is an optional feature that you can add to a standard policy. They can be especially useful to folks who need personalized coverage for a specific need. A chronic illness rider, for example, provides the insured with a portion of their death benefit if they’re diagnosed with a terminal illness. A disability rider waives or reduces the monthly premium if the policyholder becomes incapacitated.
If anyone relies on you for financial support — children, spouse or parent — you should have life insurance.
Many people buy a policy around the time of a major life milestone. When you take on debt to buy a house or send a child to college, a policy can help ensure that your obligations are paid even if you die. A life insurance policy can also help your dependents manage living expenses as well as include final expense insurance for burial and funeral costs.
It’s worth shopping around to see if any life insurer offers a policy designed for your specific situation. Health insurance companies generally classify clients in one of four categories: Preferred Best (sometimes called “Super Preferred”), Second Best Preferred (or simply “Preferred”), Standard Plus and Standard. Current or recent smokers are classified as either Preferred Smoker or Standard Smoker.
Each insurance company has its own approach to classifying customers; some may categorize you as a smoker even if you quit three years ago. Your categorization will help determine your life insurance coverage premium. After you complete an application and a medical exam, you’ll be able to see what policies are available to you.
If you’re having trouble finding a company that will write you the life insurance policy you want, you may want to consider guaranteed issue life insurance, which does not require a medical exam. However, it will come with a low death benefit and high premiums.
There are a few ways to find an appropriate coverage amount. An “income replacement” strategy provides your family with a payout that’s sufficient to support them for 15 to 20 years, through a combination of principal and interest. An appropriate amount of coverage is roughly 10 to 12 times your current annual income.
Another option is “expense calculation,” which correlates the size of the policy with your present and future financial obligations — such as a mortgage or college tuition (which currently comes to around $175,000 on average for a private four-year institution). Both factors can help you when determining the size of your policy.
Life is unpredictable, and when your financial situation changes, you’ll need to reassess your insurance coverage. If you no longer need insurance, you can always cancel your policy. If your obligations increase significantly — you take on a mortgage or have kids, for example — you can always purchase additional insurance. Even though life insurance is designed for the long term, there are plenty of supplemental options for when circumstances change.
Despite the name, life insurance is really more income insurance. It ensures uninterrupted financial support for your family. Once your children can support themselves, your mortgage is paid off and you’ve saved enough to cover retirement, you’ll have less need for life insurance.
Some life insurance policies allow policyholders to earn dividends on their whole life insurance policies when the company does well.
Yes, typically those diagnosed with cancer can still get life insurance. If a person’s cancer is in remission, they may be able to qualify for a term or whole life insurance policy. However, typically those with cancer may only have the option of getting a guaranteed issue life insurance policy. Guaranteed issue policies usually do not require a medical exam and accept most applicants. However, the death benefit is typically low — around $25,000 — and premiums are typically quite high.
Yes. The best time to buy life insurance is when you’re young and healthy, because it becomes more expensive as you get older.
You want a policy that covers the period of your greatest financial liabilities. If you’re buying insurance today to ensure that you can pay college tuition for a 12-year-old child, for example, a 10-year policy would make sense. It’s generally better to err on the side of a longer-term policy, since the cost and availability of products will change as you get older.
For most people, the answer is no. Guaranteed life insurance policies are easy to get, even for older or less healthy people who may not need to take a medical exam. But the death benefit is typically very low and the premiums are high. Also, most guaranteed policies have a two-year waiting period: If you die during the first two years of coverage, the insurer will refund the cash value of the premiums you paid — but not provide the death benefit.
How we chose the best life insurance companies
All the providers profiled here satisfy the minimum requirements for a life insurance company. Our analysis prioritized customer service, financial standing and price -- but each of these companies has earned respectable customer service grades from J.D. Power, a low complaint index from the National Association of Insurance Commissioners and an A++ or A+ rating for financial strength from A.M. Best.
Though some of their policies are less expensive than others, all of these insurance product companies offer competitive premium rates. Note that the exact price of your life insurance policy will depend on your health, location, sex and age. The bottom line: You can confidently choose any of these insurance company options for a reasonably priced, comprehensive term life insurance policy.
More financial advice
- Best Online Will Makers
- What Is Life Insurance? Here Are the Most Common Types
- Estate Planning 101: Your Guide to Wills, Trusts and All Your End-Of-Life Documents
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
