You probably have a few dependents right now, but know that one day, as your children grow older and retirement grows nearer, they will no longer be financially dependent on your income. If this is the case, a term life insurance policy is likely right for you.
When searching for the best term life insurance rates, it is important to remember that depending on your health, age, lifestyle, and coverage needed, there is a broad spectrum of affordable term life insurance policies available on the market that fit your needs.
Comparing term life insurance coverage can be a real hassle if trying to do it on your own, so we took the liberty to construct a list of the Best Term Life Insurance Companies in the United States in 2018. Each company was chosen based off of J.D. Power ratings, A.M. Best Ratings, Customer Reviews, and the overall quality of their products and services.
Top 10 Term Life Insurance Companies [in the U.S. 2019:]
|Company||JD Power Rating||A.M. Best Rating||Reviews|
|1. New York Life||782||A++||4.1|
|2. Mass Mutual||787||A++||4.0|
|3. Mutual of Omaha||789||A+||4.0|
|4. Voya Financial||781||A+||4.0|
|5. Banner Life||N/A||A+||4.0|
|6. Pacific Life||808||A+||3.9|
|10. Genworth Financial||789||A+||3.8|
What Is Term Life Insurance?
Simply put, term life insurance is coverage with an end date. When you purchase a term life policy, you not only decide on the amount of coverage but how long the coverage will last.
Common term life insurance policies are anywhere from 5-30 years. Additional riders and add-ons can allow for conversion or extension of the policy into whole life insurance, a type of permanent life insurance; coverage that lasts until death, with a guaranteed payout.
At the end of the policy term, the coverage will continue as long as you renew and continue to pay the premium. However, the price will increase from the premiums you paid during the “term”.
Essentially, the term doesn’t necessarily lock in coverage for a period of term, it guarantees the cost of the policy for that term.
Without that set term, your premium would increase every policy year because your age continued to increase.
When you purchase a term policy, the longer the term you select the higher the premiums will be because the company is more likely to pay a claim on the policy.
To summarize…term insurance is life insurance with a guaranteed premium for a specific amount of time.
What Is Permanent Life Insurance?
Have you heard of whole life, universal life, variable universal life, or cash-value life insurance? Each of those products is a type of Permanent Life Insurance. So what is the difference between whole life insurance and term life insurance?
Term Life Insurance vs. Whole Life
Permanent life insurance is guaranteed for the life of the policyholder. There is no termination date during the life of the customer.
That sounds like a better deal, doesn’t it? Why would you buy something that ended when you might need it rather than buying something that could cover you for your entire lifespan.
Well, there are a few major reasons why term life insurance could be better for you than whole life insurance:
Average Cost Of Term Life Insurance vs. Whole Life
Because permanent life remains in effect until the policyholder dies, the cost is much greater. The price is higher because there is a greater likelihood the insurance company will pay a claim on the policy.
As you get older, you may need less coverage because perhaps you have fewer dependents than you did while you were younger, and you own most of your mortgage, with little debt.
Yes, a customer can cash out a permanent policy. This is another reason permanent insurance is much more expensive than term. Beyond life insurance, it is an investment vehicle. A portion of the premium is distributed into some form of investment instrument providing a return for the policyholder at some time in the future.
Permanent life policies issued by mutual companies (think..Mutual of Omaha) may actually pay dividends throughout the policy life. Mutual companies, unlike stock companies, are owned by the policyholders. Policyholders in this arrangement are much like stockholders who receive dividends on certain stocks they own.
The cash value of a permanent policy does have other benefits. A customer can borrow money against the cash value much like you could borrow against what you have in your 401k. And as mentioned, you can surrender a policy and retrieve the cash, when you decide you have no need for life insurance.
In a nutshell….permanent life is lifelong insurance with an investment component.
We mentioned whole life insurance is more expensive than term life insurance. Here’s an example of the annual coverage cost comparison for a healthy 30 year old male and female:
Term Life Insurance For Males:
|Face Amount||Whole Life||30 Yr Term||20 Yr Term|
Term Life Insurance For Females:
|Face Amount||Whole Life||30 Yr Term||20 Yr Term|
For most customers, term life is the superior product. If a person wisely saves for retirement, they have little need for life insurance as their dependents leave the nest, and their debt decreases. Their savings becomes their own self-insurance.
What Are The Advantages Of Term Life Insurance?
Here’s a recap of the advantages of term life insurance and whole life:
How Much Term Life Insurance Coverage Do I Need?
You can make this really complicated, analyzing all your assets and liabilities, future earnings, future expenses, etc. But there is one easy question that helps figure out how much life insurance coverage you need:
Think about house payments and tuition. Those are the big items.
What does your salary contribute today, and what would they need if that salary disappeared?
Once you have fewer dependents, the kids, grow up and begin their own life, and you begin to pay off your mortgage, your need for coverage in the event of your death mainly pertains to your spouse, and final expenses. Whereas whole life insurance can build a legacy for future generations if you have the wealth to do so.
How Do You Choose A Term Life Policy?
As you begin looking at a variety of term life insurance quotes, there are 5 components you should consider when trying to identify the best term life insurance rates:
That sounds like a lot of information to analyze, but we promise…it’s not that complicated. You will be a confident buyer after you read through each of these components.
Selecting A Term
Determining the length of time you need term life coverage mostly comes down to the how old you are when you purchase coverage.
When finding term life insurance for a younger person (20s or 30s) go for longer terms such as 30 yr terms because they are a very low risk of death if they are healthy.
Especially if they have kids who will be dependent throughout most of the term, have mortgages, or other loans.
For someone in their 40s and 50s, the best term life insurance rates may come in the form of 20 year policies, which often cover until age 70 (though there are some providers that insure up to age 95).
Also, something to keep in mind when determining the best term life insurance policy for you is your retirement fund. The more you have saved for retirement, the less coverage and time you need in a term life policy.
How We Determined The Best Term Life Insurance Companies
In our life insurance reviews of the best life insurance companies for term life, we made our decisions based on these 4 factors:
Life Insurance Company Ratings
Several organizations rate insurance companies regarding their financial stability.
Moody’s, AM Best, and Comdex are the standards for insurance quality ratings. Moody’s top rating is Aaa. AM Best is A++. Comdex is a combined score of many rating agencies. They rate on a scale of 1-100. A great company will score between 85-100.
The other rating organization to consider is J.D. Power. You are probably familiar with their car ratings, but they also have life insurance company ratings as well.
The Life Insurance Industry has been around a long time.m Some companies go back prior to the Civil War. Company longevity is a great indicator the company will be around when you need to reap the benefits of your life insurance coverage.
The last thing you want is your family and loved ones to be left in a bad financial position as a result of your death, and not receive the coverage they deserve. Dependability is everything in this industry.
Regardless of what the market does, you want to be able to know your provider has you and your family covered.
Size Of Company
Size is another indicator of financial strength. Be wary of very small companies or startup life companies, as they may not be as well established or have as rich of a history.
Generally speaking, the more money a life insurance company manages in its portfolio, the more you can expect them to uphold a high level of trust and dependability. The best life insurance companies all have this in common.
Life Insurance Company Reviews
Most state departments of insurance store life insurance reviews online. You want to be sure to read what people have to say about the coverage and treatment they have received in order to get a better look at what you can expect from that side of things.
We also considered reviews in the ranking of our top term life insurance companies. While reviews in this industry can be slightly harsh, some of the best life insurance companies can average about 80-85% customer satisfaction ratings.
How To Choose The Right Life Insurance Agent
More important than even company selection is agent selection. As a customer with a family and a career, it can be tough to do all the research into each insurance company you find.
A great agent will know and understand that information. He can guide you to a superior company that fits your needs and budget.
Here is what you want to look for when choosing an agent:
Life Insurance Policy Riders
Term life policies may not be as complex as permanent policies, but many do have features beyond pure coverage.
These additional features are often called add-ons or policy riders. Some help extends the term of the policy, others can change rates over time, and some offer additional death benefits and coverage options.
Some common and very helpful term life insurance policy riders are:
Questions To Ask Your Agent When Considering A Term Life Insurance Policy:
Best Term Life Insurance Companies
We’ve answered your questions of what is term life insurance and how to choose the best term life policy.
Every one of these companies is financially strong and offers some of the best term life insurance rates.
While choosing the best term life insurance company for you can be hard, you now know what to look for and what questions to ask in order to identify the right coverage for you.
You also have a very good starting point of what the top 10 term life insurance companies are.
From here, what you want to do is speak with a life insurance agent. Discuss your own needs and budget with them. They will present a collection of term life insurance quotes that provide you with the protection you need to protect your loved ones and dependents in the event of your death.
Compare the best term life insurance rates here.
Affordable rates, insanely fast quotes