No one wants to think about what would happen to their family if they passed away. Unfortunately, the truth is that an accident or sudden illness can strike at any moment — and your family might need protection. A term life insurance policy can give you the peace of mind that comes with knowing that your family will be able to stay in your home and pay for your funeral costs if you pass.
In this article, we’ll take a closer look at term life insurance and how it works. We’ll also introduce you to a few of our favorite term life insurance providers.
Best Term Life Insurance
- Best for Customer Service: State Farm
- Best for Set Premiums: New York Life
- Best for Seniors: Mutual of Omaha
- Best for Bundling: Nationwide
- Best for Simple Coverage: Bestow
How Does Term Life Insurance Typically Work?
Term life insurance is a type of protection that gives your beneficiary a payout if you die while your policy is active. In some circumstances, your life insurance may also offer a payout if you become permanently disabled and unable to work.
When you apply for a life insurance plan, you’ll choose an initial term for your policy. Your term is the length of time that your insurance policy is active. For example, if you choose a policy with a 20-year term, it means that your policy will be active for 20 years from the first month you pay for your insurance.
You’ll also name a beneficiary on your policy. Your beneficiary might be your children, your spouse, other members of your family, a business partner or even a favorite charity. You can also name more than 1 beneficiary on your policy. If you die while your policy is active, your beneficiary receives the death benefit laid out in your policy’s terms. Your beneficiary might receive your death benefit as a lump sum, or in a series of life insurance payouts.
If you don’t die during your policy’s term, your insurance policy expires and you don’t receive any type of benefit.
Your beneficiaries can use your death benefit in any way they like. There are no restrictions on what they can spend it on. Most beneficiaries use the death benefit for living expenses, debt and funeral expenses. If you have more than 1 beneficiary, you should specify how you would like your death benefit divided in your will.
Whole Life vs. Term Life
There are 2 major types of life insurance: whole life insurance and term life insurance. Let’s take a look at a few of the differences between these types.
Whole life: Whole life insurance guarantees a death benefit for your beneficiaries. Unlike a term life insurance policy, whole life policies don’t have a term. It doesn’t matter when you die, your beneficiaries will receive your benefit as long as the premium is paid.
In addition to a death benefit, whole life insurance policies also include a cash benefit portion. Every month, a small percentage of your premium goes into a the cash value that builds interest over time. You can borrow against it or take it out as a low-interest loan. The cash benefit portion of your policy can help you recapture some of the money you spend on premiums. You can only access this benefit while you’re alive. If you die, your beneficiaries don’t receive your cash benefit account — only your death benefit.
The downside of these policies is that whole life insurance policies are much more expensive than term life policies. Many whole life policyholders default on their policies because they can’t keep up with the payments.
Term life: Term life insurance policies have a set term during which your policy is active. Unlike whole life insurance, your death benefit isn’t guaranteed with a term life insurance policy. Term policies also don’t have cash benefit portions. However, they are much more affordable and easier to get online. If you’re looking for cheap life insurance, term life insurance is a good place to start.
3 Reasons to Buy Term Life Insurance
Not sure if you need a life insurance policy? Let’s take a look at a few reasons to get a term life insurance policy.
- Term life insurance can give you peace of mind. If you died tomorrow, would your family be able to cover your funeral costs? Would your spouse be able to pay off your mortgage on a single-person income? Would your son or daughter be able to go to college? You won’t have to worry about these types of issues with term life insurance — your insurance company provides your family with a death benefit to help cover expenses.
- Term life insurance policies are affordable. Term life insurance policies are affordable enough for most people to afford. You can find term life insurance for as little as $20 per month from many companies.
- Term life insurance policies have no limit on death benefit usage. Unlike some types of insurance (like mortgage payment insurance) there are no limits on how your beneficiaries use your death benefit with a term policy. Your family members can use your benefits for everything from paying off credit card debt to investing for the future.
5 Best Term Life Insurance Companies
Now that you understand how term life insurance works, let’s take a look at a few of our top picks that offer term policies.
1. Best for Customer Service: State Farm
Term life insurance from State Farm is affordable and available online. You can quickly enroll in a 10-, 20- or 30-year term through its website. Its plans begin at just $15 per month.
State Farm also consistently ranks highly in J.D. Power’s life insurance rankings. Policies are available across the country and include affordable rates and easy-to-use online enrollment tools. State Farm is an excellent life insurance provider for first-time buyers.
2. Best for Set Premiums: New York Life
When you enroll in a term life insurance plan, your monthly premiums may increase over time. This can make your policy more expensive as you become riskier to ensure. New York Life’s level premium convertible plan can lock in your premium rates for 10 – 20 years.
This can be an excellent choice for policyholders who are on a tight budget and who need a reliable premium that stays the same every year. New York Life’s policies can also be converted to permanent coverage later.
3. Best for Seniors: Mutual of Omaha
Life insurance companies prefer to issue policies to younger men and women. This is because the younger you are, the less likely you are to die during your policy term. This means that many term life insurance companies put age caps on who can purchase a policy. Mutual of Omaha allows you to enroll up to age 80.
Mutual of Omaha offers benefits up to $100,000 and terms as long as 30 years. It’s one of the best providers of life insurance for seniors.
4. Best for Bundling: Nationwide
As one of the largest insurance providers in the country, you might already have an insurance policy from Nationwide. From homeowners insurance to dental insurance to wedding insurance, its team offers a protection package for nearly anything in your life. It also offers affordable and easy-to-enroll life insurance plans with terms of 10 – 30 years.
You can bundle your term life insurance policy together with any one of Nationwide’s other insurance options and save more on both protections. Its policies also have guaranteed monthly premiums that remain the same throughout the term of your policy, which makes it an excellent choice for those looking for consistently low premiums.
5. Best for Simple Coverage: Bestow
If you’re looking to get term life insurance coverage without pages of legal jargon, consider a policy offered by Bestow. Bestow is a new online life insurance agency focused on simplifying and streamlining the insurance application. You can enroll in a term life insurance policy if approved in Bestow’s simple online application — no invasive medical exam required.
You’ll be given a final price after completing the application which takes only minutes. With simple signups and policies available with up to $1 million worth of coverage, Bestow is an excellent choice for anyone looking to make getting term life insurance easier.
Insure Yourself Against the Future
Buying term life insurance doesn’t need to be complicated. The best way to ensure that you’re getting the protection that you need is to fully read your policy’s terms before you enroll. Don’t be afraid to ask your insurance representative any questions you have about your policy, your premium and what your beneficiaries will receive if you die.
Frequently Asked Questions
1) Q: What are the advantages of term life insurance?
A term life policy allows you to purchase coverage at a guaranteed premium for a limited amount of time. This structure makes term life an affordable choice to protect your family if you have a financial commitment that won’t last forever, like a mortgage or the cost of raising kids. A 20-year term life insurance policy is the most popular life insurance policy purchased to protect loved ones if the unexpected happens. Get a quote from top providers.
2) Q: What are the advantages of whole life insurance?
Whole life insurance, along with universal life insurance and some other variants, is designed to provide coverage for your entire life. This differs from a term policy that offers guaranteed premiums for a limited time. Permanent life insurance has a savings or investment element that helps the policy to build cash value, making it an asset that can be borrowed against or even sold if you no longer need the policy.
3) Q: How much life insurance do I need?
Many in the industry recommend that you carry 8-12 times your annual income in life insurance coverage. A more granular approach can be beneficial, however, and accounting for debt and ongoing financial commitments in more detail when choosing a coverage amount can better provide for your family than an arbitrary multiple of earnings. Get a customized quote for the best policy.