Life insurance is designed to provide for others, usually our families, when the inevitable consequence of life happens. Without life insurance coverage, it’s likely that someone we leave behind will face a difficult financial burden. Life insurance can provide income replacement, pay final expenses, and can even be a valuable tool for estate planning — but only if you have a policy, and many people don’t.
A study done by LIMRA, a worldwide research organization specializing in insurance and financial services data, found that only three out of five Americans have life insurance coverage of any type. In a separate study, LIMRA points out that more people are insured by group life insurance policies than by individually owned life policies. This is good news and not-so-good news, but mostly the latter.
Group life insurance policies offered through employers are wonderful — but are also more temporary than you might realize. We might change jobs dozens of times in a lifetime. If the move is to another employer, the life insurance coverage ends.
Best Life Insurance:
- Best Overall Life Insurance: Bestow – See $5/month Plans
- Best Term Life Insurance: Haven Life
- Best for People With Children: Fabric
The Best Life Insurance Companies
With plans starting at just $3 a month Bestow is perfect for anyone on a budget. This affordable term life insurance allows you to skip the doctor appointment and say “no thanks” to the stacks of paperwork. You can get a quote quickly and when it’s convenient for you because everything is 100% online. Answer a few simple questions and get a decision instantly.
There is no need to enter your name, email or phone number to get a quote. Bestow relies on data rather than feedback from a medical exam. Take life into your own hands by applying with Bestow, the ideal combination of age-old quality fused with modern technology to deliver one of the best companies on the market.
2, 10, and 20-year policies are available, just another reason why this customizable life insurance makes our top list.
2. Best for Families and Term-Life Insurance: Haven Life
Haven Life is an innovative life insurance agency that offers a simple way to obtain term life insurance for those between the ages of 18 and 64. You can choose a term length of 10, 15, 20 or 30-years. What’s unique about this term life insurance is the way you can complete an application online and, if approved, digitally purchase coverage.
Haven Life is backed and wholly owned by MassMutual, a nearly 170-year-old life insurance company with a long history of claims-paying ability. Also available is Haven Life Plus, a no-cost rider to the Haven Term policy for customers in eligible states. Some of the great services included with Haven Life Plus are:
- A world-class fitness app with thousands of workouts and (most importantly) great music
- An app that combines the latest sleep and neuroscience research to help prevent jet lag
- A customized, state-specific, legally valid online will
Affordable and dependable, Haven Life offers protection for your family in the event of an unfortunate loss. A 20-year, $500,000 Haven Term policy, issued by MassMutual, for a healthy 35-year-old woman, is $23.34 per month. For perspective, the average American adult spends around $50 every month on subscription services. Apply for Haven Life to help financially protect your loved ones.
3. Best for People with Children: Fabric
Fabric offers term life insurance for individuals between the ages of 25 and 50. They believe that life insurance isn’t for you, it’s for your family. You can apply in as quick as 10 minutes and could be offered coverage on the spot. Their policies are issued by Vantis Life, a Penn Mutual Company, so your policy is backed by a highly-rated, financially stable provider.
Apply online or in Fabric’s mobile app. They offer a range of term lengths and coverage amounts to help you find a policy that works for you. Choose from 10, 15 or 20-year terms and coverage amounts from $100,000 up to $5,000,000.
To get an idea of how much you might spend on term life insurance with a Fabric policy, we gathered a real quote. A 20-year term life insurance policy for a 29-year-old female in excellent condition with a coverage amount of $250,000 would pay around $14.61 per month. That’s less than a burger combo at Shake Shack! Apply now and see what this affordable term life insurance will cost you.
What to Look for in a Life Insurance Company
Now that you’ve decided to shop for a life insurance policy or a second policy to complement the limited coverage you have from a group policy at your job, it’s time to figure out how to pick the best life insurance company for your needs.
People buy life insurance for reasons ranging from final expenses to income replacement to passing wealth to heirs in a tax-advantaged way. In all of these situations, you’ll want to choose a company that’s financially stable. Individual states have contingencies in place if your insurer goes belly-up, but coverage may be for a lesser amount in this event and it’s probably better not to learn firsthand what happens if your insurer goes out of business.
You can check the A.M. Best rating for the insurance company or companies you’re considering. Rather than reporting on customer satisfaction and other subjective ratings, A.M. Best is all about the numbers. Since 1899, the rating agency has made it its mission to report on the financial strength of insurers.
Breadth of Products
Referring to one of the first mass-produced cars, Henry Ford is credited for having said, “You can have any color you want, so long as it’s black.”
When the Model T was introduced, black was often the only color available.
Some life insurance companies closely parallel the selection in the early days of Ford, offering only a few policy types — and sometimes only one. In some cases, this is simply a product of specialization, but you’ll probably want to learn about more than one option when you’re insurance shopping.
The modern life insurance industry has evolved to offer a plethora of policy types, each with its unique benefits.
Unless you already know a specialized life insurance company is the best option for your unique needs, you’ll want to look at companies with enough policy types to fit nearly every situation.
Limiting your choices to insurers that have a brick and mortar presence isn’t strictly necessary, but it can be helpful to meet in person when you’re shopping for life insurance and aren’t sure what you need or if you want an agent to help you build a coverage strategy. Talking face-to-face has its advantages.
Many agencies and brokerages are able to bind coverage remotely and conversations can happen by phone or through email — if preferred. If you’ve done your research and will be buying a fairly simple policy, like term life insurance or final expense insurance, these are largely commoditized products and the need to work closely with a local agent isn’t as crucial.
If your life insurance plans include estate planning considerations, you’ll want an agent or broker who can discuss your needs in-depth. A local office makes this easier.
Price and Specialization
Like all insurance products, life insurance rates are based on coverage amount and risk. Health factors and family history play a big role in life insurance pricing because both can affect life expectancy, raising the risk of paying a claim or paying a claim sooner rather than later. The process of analyzing risk data and weighing that data to set a rate is called underwriting and insurers might weigh these factors differently. Nearly all insurers are looking at the same criteria, but one insurer might treat a given health factor more favorably than the next insurer.
The life insurance market has changed in some innovative ways in recent years. The modern market brings insurers that don’t penalize for medical marijuana use and others that give special underwriting consideration to athletes like cyclists or runners. Policy choices tend to be limited to these specialty insurers and agencies, but if a simpler term life insurance policy will do the trick, they might be worth considering.
Most Common Types of Life Insurance
Because people buy life insurance for different reasons, the life insurance industry has introduced a number of creative ways to reach the goals of your policy. Whether it’s to pay for final expenses, to pay your mortgage and provide your family with income, or to pass on a tax-advantaged pot of gold to heirs, life insurance can perform any of these feats — but you need the right type of insurance for each goal.
Term Life Insurance
Term life policies are by far the most common type of life insurance purchased by consumers, due in part to cost, but also partly due to simplicity. Term life insurance is easier to understand than other types of policies.
A term policy is the purest form of life insurance. You are covered for a set amount of time (the term) and for the coverage amount you choose. If you don’t die during that term, the insurance company keeps the premiums. However, you didn’t die, and that’s always good news.
Because the premiums are often — but not always — lower than some other types of policies, term life insurance policies are a popular way to provide coverage toward financial obligations that have an end date, like a mortgage or the money needed to raise children until they graduate college.
If you are willing to pay a higher premium, you can purchase a return of premium term life insurance policy, which does what its name suggests: If you don’t die during the covered term, your premiums are returned to you.
Permanent Life Insurance
Instead of a policy that “expires,” like term insurance, permanent life insurance is one of several types of policies that are designed to last for a lifetime. Permanent life insurance policies have an investment element that helps to build cash value in the policy and helps fund the death benefit. The cash value can be borrowed against in some situations, although this will reduce the cash value in the policy, have an interest charge, and loans against a life insurance policy can create a tax liability.
- Whole life insurance is the most common type of permanent life insurance policy. The premiums are invested in a special account with a return that’s typically two to four percent. Over time, this structure helps to build cash value in the policy. With no possibility of a negative return on investments within the policy, whole life insurance is regarded as the safest type of permanent life insurance.
- Universal life insurance is a little bit more complex. A conservative investment element is part of the policy, similar to whole life, but the policy structure differs. A universal life insurance policy (along with its variants) is an annually renewable term life policy paired with an investment account. This structure offers flexibility in premium payments and in the death benefit amount, but it’s important to keep the policy funded to preserve the death benefit.
- Indexed universal life insurance takes the same structure as a standard universal life policy but the investment element is invested in stock options that track a given market index as opposed to the safe and simple investments used by universal life and whole life policies. Because the policy is invested in options as opposed to index funds, your downside is protected — but your policy also won’t benefit from index fund dividends.
- Variable universal life insurance has the greatest opportunity for growth because the policy directly invests in stocks and funds — and collects dividends — but the price for higher performance potential is higher risk. If the investments within the policy go down, the cash value of the policy is reduced as well.
- Final expense insurance allows your life insurance policy to pay for your final expenses. These expenses might include burial costs, funeral costs, and any lingering medical bills. A final expense life insurance policy has simplified underwriting and is typically only available at age 50 and older. The death benefit for the policy is limited when compared to other policy types, usually ranging from $10,000 in coverage to a maximum of $50,000. Final expense insurance is permanent life insurance and won’t expire like a term policy.
Every individual has his or her own reasons for buying life insurance. Any comparison that chooses a best provider has to consider where the most common needs intersect and how well each company services those common needs. To be fair, specialty insurers or agents might be a better fit depending on your unique circumstances, including health factors and the goals of the policy.
The selection of policy types offered by an insurer is an important consideration. While our comparison is willing to forgive a company that doesn’t offer every type of life insurance policy, the policy types that most people buy must be well-represented.
Financial strength is also tantamount. If a bank fails, your account is federally insured up to $250,000. If an insurer fails, the burden falls to the individual states — which means 50 sets of rules on how your policy with a failed insurer will be handled. In most cases, the state will try to place the policy with another insurer. As a backup, there may be a limited amount of coverage that the state itself will pay. Backups are just that, a second choice that hopefully is never explored. We required an A++ rating by A.M. Best to screen only insurers with the highest possible financial strength rating.
Customer service can come in many forms in the digital age, but having a strong retail presence gives an edge, particularly for life insurance, which tends to breed consumer confusion due to the complexity of certain policy types. Having an agent who can answer life insurance questions when they arise — and answer the new questions that come from those answers — until all your questions are put to rest is difficult to quantify in dollars and cents but has real value to consumers.
Providing for your family if you pass earlier than expected is the most common reason that people buy life insurance. However, our needs change as we cross bridges in life. Empty nesters with no mortgage have different needs than a younger household with a mortgage and four kids, each with college aspirations. There’s a right policy for each of these scenarios and nearly any other household, but one policy type isn’t the right choice for every life insurance need. Look for choices — and someone who can guide you through those choices.
If you already have coverage through an old policy, speak with an agent and gather some new quotes.
Every birthday brings more than cake and candles. Because risk is based partly on your age, your life insurance rates will also continue to go higher until you lock in a rate by binding a policy. Waiting until next year to buy a policy will likely cost more in the form of higher premiums for the same amount of coverage.