Life insurance isn’t something we think about every day, but choosing a life insurance policy can end up being one of the most important decisions you’ll ever make.
Should tragedy strike, a good life insurance policy can protect the family members who depend on you financially. An insurance policy can’t replace you, but at least your family will have a secure financial future.
Choosing the right life insurance policy starts with choosing the right company. For starters, you’ll want an insurance company with the highest possible financial stability. The company needs to be one you can be sure will stick around for decades—if the company doesn’t at least outlive you, then your life insurance policy won’t be worth much. On top of that, the best life insurance companies offer the services and features that will allow you to build a policy to meet your needs both now and in the future. Finally, it’s important to choose a company with a reputation for excellent customer service, so that if something goes wrong you can count on them to fix it quickly and with minimal hassle.
With that in mind, Insurify set out to analyze all major life insurance companies and rank them with a single, multi-point score. The result is the Insurify Composite Score—a number that gives you an easy way to see which companies are the best for you before you purchase a policy. This scoring system makes it simple for you to find the right company and purchase the right policy, both for you and for those who count on you for financial support.
The Insurify Composite Score is calculated by analyzing multiple factors that reflect the quality, reliability, and health of an insurance company. Inputs to the score include financial strength ratings from A.M. Best, Standard & Poor’s, Moody’s, and Fitch; J.D. Power ratings, Consumer Reports customer satisfaction surveys, mobile app reviews, and user-generated company reviews. Insurify’s data scientists have taken these variables, weighted them, and combined them into a single, easy-to-understand numeric score for each company.
After crunching the data, these ten life insurance companies stood out as consistently providing excellent policy options, strong customer service, and financial strength and stability. Purchasing a life insurance policy from one of these ten companies will help to ensure that your policy will be there if your family should ever need to use it, and that the company will help your family members through the process of applying for and receiving death benefits.
Company name: State Farm
Founded in: 1922
Number of customers/policies: 83.4 million policies
Awards and rankings:
Product highlights: State Farm sells term life, whole life, and universal life policies. It’s possible to apply and file claims online through the company’s website. The site also has calculators to help figure out how much and what type of life insurance policy to get.
Policy options and riders: State Farm has a number of options and riders available, depending on the type of life insurance policy. For example, term life policyholders can get Mortgage Life insurance that will pay off the home mortgage, and universal life policyholders can have riders providing flexible care benefits, children’s term coverage, and other benefits.
Company name: Massachusetts Mutual Life Insurance Company
Founded in: 1851
Number of customers/policies: $560 billion in policies
Awards and rankings:
Product highlights: MassMutual is a mutual insurance company. That means the company is owned by its policyholders and its purpose is to provide insurance for them, not to make a profit. As a result, mutual insurance companies can often afford to offer much lower rates than standard insurance companies. The company sells term life, whole life, and universal life policies.
Policy options and riders: MassMutual offers various forms of the basic types of insurance policies. For example, term life comes in both standard forms and what the company calls MassMutual Direct Term; the latter is designed for customers who need instant approval.
Company name: Guardian Life Insurance Company of America
Founded in: 1860
Number of customers/policies: $637 billion in policies
Awards and rankings:
Product highlights: Another mutual insurance company, Guardian Life offers term, whole, and universal life insurance. The company has an online program called the Living Balance Sheet that you can use to track income and expenses and calculate how much coverage you may need.
Policy options and riders: Guardian Life offers variable permanent life insurance policies, which allow the policyholder to invest the money in certain stocks. Policyholders may also choose riders adding disability or critical care coverage (among other available options) to permanent life insurance policies.
Company name: Nationwide Mutual Insurance Company
Founded in: 1925
Number of customers/policies: $46 billion in policies
Awards and rankings:
Product highlights: Nationwide offers term, whole and universal life insurance. There’s also a variable insurance option for permanent policies. The company sells an indexed version of universal life insurance; these are fixed policies and aren’t actually invested in stocks, but part of their interest is pegged to a stock index such as the S&P 500.
Policy options and riders: Nationwide’s life insurance policies include several rider options such as accidental death benefits, children’s term insurance, and a premium waiver rider (options vary depending on the type of policy).
Company name: Metropolitan Life Insurance Company
Founded in: 1868
Number of customers/policies: Assets under management totaled over $719 billion in 2017.
Awards and rankings:
Product highlights: MetLife offers term and universal life insurance. The company’s universal policies come in both fixed and variable options. MetLife life insurance is only available through an employer or other group.
Policy options and riders: Since MetLife life insurance is always provided through a group or an employer, options and riders will vary based on the group administrator’s selections.
Company name: New York Life Insurance Company
Founded in: 1845
Number of customers/policies: New York Life is the third-largest insurance company in the USA according to Fortune Magazine.
Awards and rankings:
Product highlights: New York Life is a mutual insurance company. The company offers term and whole life insurance policies.
Policy options and riders: In addition to standard whole life insurance, New York Life sells Custom Whole Life (with fixed premiums for a set period of time determined by the policyholder) and Value Whole Life (with a longer premium payment schedule, but smaller payments). Available riders include chronic care, living benefits, and accidental death benefits options.
Company name: Prudential Financial, Inc.
Founded in: 1875
Number of customers/policies: $3.7 trillion in policies
Awards and rankings:
Product highlights: Prudential offers term and universal life insurance policies. Universal policies come in fixed, indexed, and variable versions.
Policy options and riders: Prudential has a myriad of rider options available, including disability, illness, and estate planning riders in various forms.
Company name: Penn Mutual Life Insurance
Founded in: 1847
Number of customers/policies: $142 billion in policies
Awards and rankings:
Product highlights: As the name implies, Penn Mutual is a mutual insurance company. It offers term, whole, and universal life policies. Universal life comes in standard, indexed, and variable versions.
Policy options and riders: Penn Mutual has riders for accidental death benefits, children’s term insurance, and disability waivers, among others.
Company name: Pacific Life Insurance Company
Founded in: 1868
Number of customers/policies: $916 billion in policies
Awards and rankings:
Product highlights: Pacific Life offers term and universal life insurance policies. Universal life comes in standard, indexed, and variable versions.
Policy options and riders: Pacific Life has riders for children’s term insurance, terminal illness, and disability waivers, among others.
Company name: Principal Financial Services, Inc.
Founded in: 1879
Number of customers/policies: Assets under management totaled over $673 billion in 2017.
Awards and rankings:
Product highlights: Principal Financial offers term and universal life insurance policies. Universal life comes in fixed and variable versions.
Policy options and riders: Principal Financial has riders for disability, children’s term insurance, and chronic illness benefits, among others.
Once you’ve chosen a life insurance provider, it’s time to decide which type of policy will be the best fit for you. With a few exceptions, most life insurance policies fall into one of four categories: term life, whole life, universal life, and variable life. The latter three options are also sometimes grouped together under the category of permanent life insurance.
Term life insurance is the only type of policy that has a set expiration date. These policies protect an individual for a certain period of time (typically one, five, ten, or twenty years). Term life insurance is a good choice for policyholders under the age of 50 who just need basic coverage.
Whole life insurance is the most basic form of permanent life insurance; like all permanent policies, it covers you for your entire life. As you pay premiums, the policy accrues a cash value that you can tap into or use as collateral. Your premiums, the cash value of the policy, and the payout are all guaranteed with a whole life policy. Whole life insurance is a good choice for someone who wants an emergency cash cushion and doesn’t like surprises.
Like whole life insurance, universal life is a permanent life insurance policy and accrues a cash value over time. However, universal life insurance is far more flexible; you can change your premiums at any time, and as long as you pay a certain minimum amount, your death benefit can change. On the other hand, universal life doesn’t come with the guarantees that whole life offers. Universal life insurance is a good choice for policyholders who want to have permanent insurance but still keep their premiums as low as possible.
Variable life insurance is typically a form of whole or universal life. With a variable policy, you can invest part or all of your policy’s cash value into certain stocks or other assets, turning the policy into an investment vehicle. Naturally, that makes variable life insurance the riskiest of all four types of policies–since there are no guarantees, you could lose your policy’s entire cash value if your chosen stocks were to crash. However, if you make wise or lucky investment decisions, you could potentially show a bigger profit from a variable life insurance policy than from a comparable fixed policy. Variable life insurance is a good choice for skilled investors who want to grow their money quickly and are comfortable with a high level of risk.
If you know you need life insurance but aren’t sure which kind to get, term life insurance is probably your best option. As the only temporary form of life insurance, term life gives you protection for your family and other dependents without locking you into the policy forever—but in the event of your death, term life could assist your beneficiaries with mortgage payments, daily expenses, and education bills. Premiums on term life insurance are also far lower than premiums on comparable permanent life insurance policies, so it’s the most economical option. Plus, many term life insurance policies give you the option to either renew the policy or convert it to a permanent policy when the term ends.
While term life insurance is the simplest and most straightforward life insurance option, it does come in a few different varieties. Here are some of the most common options you’ll see when pricing a term life insurance policy.
Term Level Life Insurance versus Annual Renewable Life Insurance
Most term life insurance policies run for a term of five to thirty years. Once you buy the policy, your premiums stay the same for the entire term–and so does the death benefit. Annual renewable life insurance is the short-term version of term life: the term is set for a single year, and once the year is up, you can choose to renew the policy a certain number of times as determined by the policy contract. Annual renewable life insurance generally has lower premiums than term level life insurance, but because your premium can go up every year, it’s not a great choice for someone who wants long-term coverage. Annual renewable life insurance is best used if you only need coverage for a year or two and plan to switch to a different type of policy after that.
Return of Premium Life Insurance
When you buy a term life insurance policy, you may be able to choose a “return of premium” option for that policy. Return of premium policies work just like standard term life insurance policies, except that if you are still alive at the end of the term, the insurance company gives you back all the premiums you paid during the term. Not surprisingly, return of premium policies are a lot more expensive than standard term life policies; however, if you’re pretty sure you’ll outlive the policy, they may work out to be a better deal.
No Medical Exam Life Insurance
Most life insurance policies require you to undergo a standard medical exam before the company approves you for the policy. Naturally, life insurance companies want to make sure that you’re in reasonably good health before they commit to paying substantial death benefits. However, some policies allow you to skip the medical exam entirely. Not all companies offer these no medical exam policies, and those that do sometimes hike the premiums way up to compensate for the additional risk they represent. It’s important to compare all your options before choosing such a policy, to make sure you’re not paying through the nose for the convenience of skipping the medical exam.
If you have a solid health history, you may be able to qualify for a variant of the no medical exam policy called “accelerated underwriting.” Accelerated underwriting policies rely on a background search that looks at your medical history, including prescription records, lab reports, and doctor’s reports, to see if you’re a good candidate. The advantage of an accelerated underwriting policy is that premiums are typically comparable to those of standard term life policies, even though you still get to bypass the medical exam.
Whereas term life insurance can be understood as “pure and simple” insurance, permanent life insurance policies are more like a combination of a life insurance policy and an investment. Permanent life insurance policies have no set term; the policy remains in force so long as you keep paying the premiums. What’s more, once you’ve paid premiums for certain length of time (typically five years or so), a permanent life insurance policy begins to develop what’s called “cash value.” You can think of cash value as a savings account tacked onto your life insurance policy. Permanent insurance policies will even pay you a small amount of interest on the cash value portion of the policy, or reimburse you based on your investment returns in the case of variable life insurance policies. The big drawback to permanent life insurance policies is that premiums are much, much higher than they would be for a term life policy with the same death benefit. For that reason, most people are best off with a term life policy. However, if you’re one of the exceptions or you just want to know what your options are, read on.
Whole Life Insurance
Whole life insurance is the simplest and most dependable form of permanent life insurance. With a whole life insurance policy, you pay a set premium and in return you get a guaranteed death benefit, a guaranteed cash value and a guaranteed interest return on that cash value. Most whole life policies will let you tap into the policy’s cash value in a variety of ways. For example, you may be able to use the policy as collateral when borrowing money or simply withdraw some or all of the cash value during your lifetime (but beware of “surrender penalties,” which penalize you for withdrawing that money earlier than the policy documents allow).
The big drawback to whole life insurance is that the interest you’ll get on the cash value of the policy is almost guaranteed to be way less than you’d get if you’d put the money into an IRA, for example, or even a bank money market account. Combined with the higher premiums you’ll pay compared to term life insurance policies, this can make a whole life insurance policy a waste of money. For some people, though, whole life insurance can be a solid financial option. For instance, if you have a great deal of money and want to avoid estate taxes, purchasing a whole life insurance policy is one way to get your money to your beneficiaries tax-free and reduce the size of your estate in the process.
Universal Life Insurance
Universal life insurance is similar to whole life, but with a bit more flexibility. For one thing, once you’ve built up enough cash value in the policy, you have the option to pay your premiums out of the cash value instead of from your pocket. You may also be able to increase the policy’s death benefit if you’re willing to increase your premium payments as well (many companies will require you to pass a medical exam first, though). You can also decrease both your death benefit and premium payments if you feel the need, subject to certain limits. Thus, if you decide that a permanent life insurance policy is the best option for you but you want to keep some level of flexibility, universal life could be the best choice.
Variable Life Insurance
Both whole life and universal life policies may come in the form of a variable life insurance policy. Standard whole and universal life policies are sometimes called fixed insurance because the interest you receive on your cash value account is set at a fixed percentage when you take on the policy. But if fixed insurance cash value accounts work like bank savings accounts, then variable insurance cash value accounts are more like a brokerage account. The insurance company will give you a menu of investment options (typically stock and/or bond mutual funds), and you can choose to invest some or all of your cash value in those options. Choose wisely, and you could potentially have a much higher return than you would from a comparable fixed insurance policy…but if you pick the wrong investments, you could end up losing your policy’s entire cash value.
Variable life insurance policies are also notorious for high fees that will eat away at any investment returns you make. They also tend to be riddled with restrictions and limitations, including surrender penalties. Finally, insurance agents often receive very high commissions for selling such policies, which means they are motivated to push variable life policies whether or not they’re the best choice for you. While a variable life insurance policy could be a good choice for a skilled investor with nerves of steel, you’ll want to go over the policy documents very carefully (including the fine print) and compare the potential returns (minus fees) with what you’d get from a comparable fixed life insurance policy before you sign up.
If you can’t qualify for standard life insurance policies because of your age or health, you may still be able to get a final expense policy. These policies, also known as burial insurance, give such individuals the chance to arrange a death benefit that will at least pay for funeral expenses and possibly clear any debt they’re carrying as well. Final expense insurance is typically sold as a variant of whole life insurance, sometimes under the name of simplified or guaranteed whole life. Simplified whole life insurance can be a good choice for someone who’s not able to qualify for standard insurance but is still in fairly good health. Guaranteed whole life is an option for someone who can’t qualify for simplified whole life. Both variants don’t require medical exams, although qualifying for simplified whole life requires you to answer some questions about your medical history. You can qualify for guaranteed whole life with no questions asked (about your medical history, anyway), but you’ll pay higher premiums and your death benefit will be very limited–typically to no more than $25,000.
A rider is an extra provision on an insurance policy that adds coverage or changes the standard coverage in some way. Most kinds of riders must be attached to the policy at the time you sign up, although this varies based on the nature of the policy and the rider. Adding one or more riders to a policy will typically increase your premium for that policy, sometimes dramatically. You’ll find a few of the most common life insurance riders in the below table.
|Rider||How it works|
|Return-of-premium rider||If your term life insurance policy includes this rider, then the insurance company will repay all your premiums at the end of the term–assuming you’re still alive.|
|Term conversion rider||A term conversion rider lets you convert a term life insurance policy into a whole life insurance policy at the end of the term.|
|Waiver of premium for disability rider||If you become seriously disabled, this rider will allow you to keep your life insurance policy without paying any further premiums.|
|Accelerated death benefit rider||If you receive a terminal diagnosis, this rider will let you claim your death benefit while still alive to help pay the end of life medical bills. Many term life insurance policies include this rider at no extra cost.|
|Child rider||Children rarely need life insurance coverage, but if you feel that your child is an exception, you may be better off getting a child coverage rider on your insurance policy rather than getting your child a policy of his own.|
|Critical-illness rider||Like the accelerated death benefit rider, the critical illness rider will pay out part or all of your death benefit to help you pay for treatment of certain illnesses such as cancer, heart attack, stroke, and so on.|
|Spousal rider||A spousal rider means you’ll receive a death benefit if your spouse dies; the premium increase is usually less than you’d pay for a separate policy for your spouse, but death benefits are also likely to be smaller.|
|Accidental death and dismemberment rider||This rider gives you extra coverage, typically in the form of a larger death benefit, if you die in some sort of accident. It will also pay a (reduced) benefit if you’re dismembered or lose important functions such as sight or hearing.|
Now that you’ve made it this far, you understand the basics of how life insurance works, what the different types of policies are, and which insurance companies are best. That means you’re well placed to make a smart financial decision about life insurance. The next step is to collect quotes from some of those top-ranked companies and see which types of life insurance coverage they’ll offer you for the price. Remember: premiums, fees, and coverage options can vary widely from one company to another. Because different companies ask for different information from applicants, the same type of policy and coverage level could cost much more from one company than another. Getting a range of quotes on the best type of life insurance policy from the best companies in the market helps guarantee that you’ll be getting a great deal and protecting your family at the same time.