If you’re like most people, finding the best life insurance isn’t exactly your idea of fun. But if you have loved ones who rely on your income, the right life insurance policy can help protect them and alleviate stress at the time of your passing.
Although people habitually overestimate its cost, in reality life insurance doesn’t have to be that expensive. Millennials estimated the cost of life insurance as five times its actual price, according to LIMRA’s 2018 Insurance Barometer Study.
Luckily, selecting and buying a life insurance policy doesn’t have to take a lot of time. There are many places you can start your application online. In fact, almost half of adults looking for life insurance in 2018 researched purchasing it on the internet, according to the LIMRA survey. The trick is to find the best life insurance companies, so that you know you’re getting the most appropriate protection for the right price.
Important Points to Know About Life Insurance:
- The two most common types of life insurance are term life and whole life. A term policy expires after a set period of time, while whole life insurance is permanent and accumulates a cash value that consumers can borrow against.
- Many financial experts recommend term life insurance for the average family, since that is adequate for most needs.
- Whole life insurance is often sold as an investment, but it comes with much higher premiums than term policies. And if you simply want to invest your money in the stock market, buying low-cost index funds is a cheaper way to go.
- Most life insurance companies will require you to take a free, in-home medical exam as a part of the application process.
- There are many ways to estimate how much life insurance you need, such as purchasing a policy worth 10 to 12 times your income, or estimating the expenses and debts that need to be covered if you die with those obligations.
- Not everyone needs life insurance — if no one would be harmed financially by your death, it may not be for you.
The 5 Best Life Insurance Companies
- AIG Direct: Best for financial strength
- Health IQ: Best for health-conscious people
- Bestow: Best for no medical exam
- Ladder: Best for flexible coverage
- American National: Best for add-on rider options
Life Insurance Company Reviews
You have a lot of options when it comes to choosing a life insurance company. Look beyond premium prices — it’s important to consider a wide range of factors, such as the company’s financial standing, customer service, price, and more.
AIG Direct: Strongest Financial Ratings
AIG Direct is a relatively new life insurance company, having started in 1995. Since then, it’s grown rapidly into one of the largest life insurance companies around. AIG Direct maintains an A rating from A.M. Best.
AIG Direct offers a full line of life insurance products, including universal life insurance, whole life insurance, accidental death insurance, and more. Its most popular option is term life insurance, where you can purchase a policy from 10 to 30 years. AIG Direct offers three different versions of term life insurance: level (or standard), renewable, and convertible, which allows you the option of trading your policy in for permanent life insurance when it expires.
The company also provides a range of different riders, which are optional add-on products that can help customize your policy. For example, you can choose a “quality of life” rider that allows you to start drawing from your insurance before you pass away if you’re ever diagnosed with a critical, chronic, or terminal disease.
If you are a little unsure about life insurance in general and want to learn more about it before purchasing a policy, AIG Direct provides a number of helpful articles on insurance products, including how to determine the best type of policy for you, how to calculate the amount of coverage you’ll need, and many more topics. Getting a quote and purchasing a policy from the company can be easily done online or, if you like a more personal touch, by contacting one of their agents via their Quote Hotline.
Health IQ: Best for Health-Conscious People
If you’re an avid exerciser, Health IQ may be a good option for you. Don’t let the name fool you, this company is actually an insurance agency, and it offers special rates on life insurance to health-conscious people through the use of an innovative, proprietary number also known as your Health IQ.
Your Health IQ is generated by a quiz that was developed by leading experts and researchers to gauge your own knowledge of fitness. Rather than asking questions about how much you exercise, how much you weigh, etc., it asks you questions that only someone who routinely works out would know the answers to. The company has conducted research on how your score correlates with your risk of death at various ages, and then uses this information to help you qualify for up to a 41% discount off of standard life insurance rates. You can also qualify for lower rates by proving that you’re active, such as by participating in a competition or running a mile within a certain amount of time.
Following this focus on rewarding those who lead a healthy lifestyle, Health IQ offers not only the standard life and disability insurance policies, but also plans for well managed diabetics, who can save up to 38% on premiums, and healthy seniors looking for a Medicare supplemental policy, who can save up to 33% on premiums, as long as the health requirements are met.
Customers rave about Health IQ’s good customer service from friendly agents, part of the reason why it has a five-star rating on Trustpilot.
Bestow: Best for No Medical Exam
If the idea of needles and medical exams makes your squeamish, Bestow offers a workaround. Bestow works directly with one company, the North American Company for Life and Health Insurance, which itself has an A+ rating from A.M. Best. Bestow’s major selling point is that it uses proprietary algorithms to judge your health level without the need for a medical exam. That means no nurses, no needles, and no handing your biological samples over to a faceless corporation.
Being able to apply for life insurance without a medical exam has another added benefit: it’s a lot faster. It can take weeks to go through the full underwriting process for a typical life insurance policy, but with Bestow’s exam-free application, you may be able to finish applying for a policy in as little as five minutes. In fact, the whole application process is online, unlike other insurance companies that offer an online quote and then refer you to an agent to complete the process. Need help along the way? No problem. You can contact Bestow’s insurance agents either by phone, email or live chat.
It’s a business model that plenty of people are happy with, but note that this convenience may come at a price: you may be able to qualify for cheaper rates on life insurance by going through a medical exam with another insurance company, although it’s still worth it to get a quote from Bestow to see if this applies to you.
Bestow only sells term life insurance in two flavors: short term life insurance for two years, or longer term life insurance for either 10 or 20 years. That’s a smaller offering than many other life insurance companies, which typically also offer permanent or whole life insurance. Bestow also has a 30 day money back guarantee – change your mind about the policy? Get a full refund.
Ladder: Best for Flexible Coverage
One of the wrinkles with term life insurance is that while it’s the cheapest option, your insurance needs may change over the course of your term length. For example, you might pay off some big debts, which could decrease the amount of life insurance you need, or give birth to a child, which would increase it. While you can always buy more insurance, you can’t buy less—unless you go with a life insurance company like Ladder.
Ladder only sells term life insurance policies from 10 to 30 years. It works differently from other life insurance companies in that you can increase or decrease the amount of coverage you have at any time with just a few clicks of the mouse and without having to pay any additional fees. What’s more, the price you pay for a given insurance amount won’t ever change during its term with Ladder’s “Price Lock Guarantee.”
The quote and application process is all done online, which means you can get a quote and purchase a policy within minutes – no medical exams needed. Ladder’s insurance agents don’t work on commission, so they won’t try to upsell you a policy with coverage you don’t need. If you need help during the process you can easily get information via live chat. Ladder’s 30 day money back guarantee gives you the option of cancelling the policy if you find it’s not the right fit for your needs.
To offer this life insurance, Ladder has partnered with Fidelity Security Life Insurance Company, which carries an A.M. Best rating of A. If you opt to have your policy renew at the end of its term, the policy will be underwritten by Hannover Life Reassurance Company of America, which carries an A.M. Best rating of A+.
American National: Best for Riders
The American National life insurance company isn’t the flashiest insurance carrier out there. After all, it’s an old-school company, having been founded over a century ago in 1905. Still, it offers a more robust assortment of life insurance products than most, and comes with an A rating from A.M. Best.
You can buy term life insurance as either short-term annual policies, or longer-term policies lasting from 5 to 30 years. American National also offers whole life insurance policies, universal life insurance policies, and guaranteed universal life policies, among other options.
The company also offers a wide range of optional riders. For example, you can purchase disability riders, accelerated benefit riders, and guaranteed cash-out riders to help ensure peace of mind.
As a full-fledged insurance company, American National not only offers a large variety of life insurance products but also a full line of insurance policies – from home, auto and health insurance, to specialty products like credit life and disability insurance, guaranteed asset protection, and more. If you’re looking for more than just life insurance American National may be the best choice for you.
How We Found the Best Life Insurance Companies
The best life insurance companies offer measurable advantages over the competition. Here’s how we selected our winners:
A.M. Best Rating of A or Better
Life insurance works a bit differently than other types of insurance because it’s a long-term commitment. You don’t want to lock in your premium now, only to have the life insurance company fold later. That’s why we selected companies that have a strong financial footing, as measured by A.M. Best, a credit rating company for insurance companies. Companies that have an “A” rating or better are among the most solid life insurance companies you’ll find, which can help give you peace of mind that the company will be around to pay claims for the long term.
Strong Online Presence
People today are increasingly using their mobile devices for tasks once reserved for phone conversations or personal visits. We chose companies that had a strong online presence and made getting quotes and purchasing policies easy over the internet. We also favored those that offered multiple avenues of contacting company representatives for assistance if necessary.
Unique Business Models
Even with high financial scores, there’s not a lot to differentiate many of the standard life insurance companies out there. Many will offer very similar insurance products. That’s why we also placed emphasis on including more recent companies that use new technologies to provide you with a life insurance product that can better meet your needs. These carriers still generally partner with older, time-tested life insurance companies that provide solid financial backing,
Choosing the Right Life Insurance Policy
When it comes to choosing the best life insurance policy, knowing the difference between whole, term and universal life insurance, as well as knowing what a rider is can help you select the right insurance product. We’ve broken down what each term means so when it’s time to make an insurance purchase, you’ll have a good idea of what each policy is and have an idea of what might be your best option.
Permanent Life Insurance
The term permanent life insurance covers a number of insurance policies (discussed below) that span your entire life, from the moment you purchase it to the moment you pass on. Permanent policies have a fixed monthly premium. They not only provide a death benefit to your designated heirs, but also a savings portion that can accumulate cash value at a guaranteed rate of return. The cash value amount of the policy can be withdrawn, used as a loan, or in some cases used to reduce the premium payments on your policy. Premium payments on permanent life insurance policies are usually higher than those for term life insurance policies, so these policies may not be the best option if you are on a tight budget.
Whole Life Insurance: This is the most common type of permanent life insurance and it allows you to lock in a fixed-rate premium for the life of the policy. The savings portion of the policy will also accumulate cash value at a fixed rate, and interest earned is usually tax-deferred.
Universal Life Insurance: Similar to Whole Life insurance, Universal Life insurance will provide a death benefit and accumulate a cash value. However, this type of life insurance offers greater flexibility. You can choose to adjust the amount of the death benefit, or use accumulated cash value to reduce premium payments. However, once the cash value amount is gone, you either start paying the premiums again or the policy may lapse. People who want the stability of a fixed premium but the flexibility to change the amount of coverage over time may find this policy to be a good option.
Variable Universal Life Insurance: Once again you’ll have a fixed monthly premium with this product but you will be able to invest the savings portion in a variety of options whose interest rates can fluctuate. While the death benefit and premiums paid on this policy can fluctuate as well, any investment losses you incur can reduce the cash value and, eventually, the death benefit of the policy.
Indexed Universal Life Insurance: As the name implies, the cash value component if this policy is not fixed but rather tied to the performance of a trading index (like NASDAQ or the S&P 500) chosen by your insurer. While the interest earned by this policy is not fixed, most usually come with a minimum interest rate guarantee.
Term Life Insurance
Term life insurance will provide a fixed death benefit for a specified period of time. Say you buy a $25,000 policy for a period of ten years. If you pass away during those ten years, the death benefit is paid. If you live beyond the ten year term of the policy, it expires and no benefits are paid. Some insurance providers will offer the option of renewing the policy for a new term, but the premiums are likely to change, as they are based on your age, gender, and health. Term insurance policies usually have premiums that are much lower than permanent policies because of the lower risk term policies represent for insurers. Term policies can be taken for as short as a one year period up to a maximum of 30 years, or be tied to a specific age (commonly 65). There are two basic types of term insurance policies.
Level Term policies mean that the death benefit stays constant during the full term of the policy. Decreasing Term means the death benefit goes down, normally in one year increments, during the term of the policy. Some insurance companies may also provide a “return of premium” feature, which means that if the policy comes to term and the death benefit wasn’t paid out, all or part of the premiums you paid will be refunded (it also means you’re still alive).
A rider is an addendum to an insurance policy that adds benefits to or amends the provisions of the policy. Riders allow those purchasing insurance to add benefits they feel are necessary but may not be included in their basic policy. Among the more common riders you’ll see are accelerated death benefits, long term care provisions, premium waivers, and even benefit exclusions for specific events or health conditions. Riders increase the premium you’ll pay for your insurance policy, so make sure they are absolutely necessary before adding them.
The types of policies we described above are the more common policies offered by insurance companies. However, these companies may have other options, different combinations of benefits, or other insurance products that may fit your needs better. Do your research, consult with your insurance agent, and don’t be afraid to compare and ask questions. Having life insurance is important, but having the right kind of insurance is even more so.
How Much Life Insurance Do I Need?
While having the right policy is important, so too is buying the right amount of insurance. Too little, and your loved ones won’t be fully protected. Too much, and you’ll be overspending for years to come. Luckily, there are a few different methods for deciding how much to buy.
Rule of Thumb: 10 to 12 Times Your Income
At a bare minimum, many financial experts recommend a quick back-of-the-napkin calculation: 10 to 12 times your annual income. For example, if you make $50,000 per year, you’d need to purchase $500,000-$600,000 worth of life insurance.
This is a good starting point for most people, but realize your actual needs might be more or less than this amount. For example, if you’re debt-free with no children and your spouse earns more than you do, you may not need as much life insurance as this. That’s why many experts recommend crunching the numbers as a better approach.
Tally Up Your Financial Obligations and Savings
Unless you’re getting fancy with high-net-worth estate planning, most life insurance has a specific purpose: to provide financial support for your loved ones upon your death. For most people, that generally means paying off any debts that you may owe, paying your children’s college tuition (if applicable), and providing a supplemental income to keep your family afloat in the absence of your regular paycheck.
You may also consider funding your funeral expenses, budgeting enough money for your spouse to take bereavement leave without having to worry about going back to work immediately, and including the costs of raising a child until age 18.
Example: The Smiths
As an example, let’s consider the Smiths, a hypothetical family with a set of twins and two working parents who each earn $50,000 per year. If the Smiths have $500,000 worth of mortgage debt, $10,000 worth of car loans, and $50,000 worth of student loans, their total debt is $560,000. The Smiths also want to save $20,000 each for their kids’ college education, and expect that a funeral would cost $10,000.
Thus, the Smiths tally up their financial obligations: $560,000 of debt, $40,000 in anticipated college savings, and $10,000 in funeral expenses, for a total of $610,000. In addition, the Smiths want to provide enough income for the other spouse to live on for a full five years if they choose (add on $250,000), and enough money to raise their two children to age 18, from their current age of five. The USDA estimates that it costs $14,000 per year to raise one child, so the Smiths will need an additional $364,000 to raise their children.
Adding up all these expenses, and the Smiths estimate that they’ll each need a life insurance policy worth about $1.25 million.
Use a Life Insurance Calculator
You can also take a shortcut and use a life insurance calculator, which are available for free on many life insurance company websites as well as other insurance advice websites. If you opt for this route, try using several calculators and taking the average life insurance amount so that you’re getting the best estimate.
Using a life insurance calculator can provide you with a better estimate than a rule of thumb, but it may not be as accurate as calculating how much you need yourself, or even asking for professional help. Still, it’s a reasonable alternative and will give you an idea of how much coverage you’ll need to buy.
Ask a Financial Advisor or Life Insurance Agent
The best way to find out how much insurance you need is to ask a life insurance agent, or even better, an independent financial advisor. While agents are essentially salespeople for life insurance policies, they may still be able to help you find a policy that meets your needs.
Financial advisors often receive a commission based on the investments they manage for you, but it’s also possible (and often preferable) to find a fee-only financial advisor. These financial advisors provide unbiased financial advice for a flat fee, and they can help you determine how life insurance fits into your larger financial picture.
Review Your Policy Regularly
Now, this may not sound like fun, but it should be a part of your financial or estate planning. You should review your life insurance policy regularly to make sure the coverage you initially chose is still the right one for your needs. Circumstances in life can change. Events like getting married (or divorced), having children, and buying or selling a house can all affect how much insurance coverage you need or the number of beneficiaries you have designated on the policy. Any major life changes should trigger a review of your life insurance policy. In fact, according to the Insurance Information Institute, you should make a habit of reviewing your policy once a year – this way you won’t forget to do so if a major event does occur in your life.
Getting insurance is an important part of life and the process can be confusing at times. But with the right information in hand, that process can be much smoother and you’ll be able to choose the best options with confidence.