Now that the holidays are approaching, it’s time to celebrate. While buying life insurance might not be as exciting as buying other gifts this season, giving your family financial peace of mind is one of the best presents you can give them. Getting started with term life insurance is easy and reasonably priced.
There are numerous options for reasonably priced term life insurance. To identify the top providers of term life insurance, we compared the features and prices offered by each company.
Editor’s Note: MassMutual stated in November 2023 that it will be closing Haven Life. MassMutual will continue to provide support for the current policies.
Best Term Life Insurance Companies
Following an analysis of 260 coverage details, the following are our top choices for term life insurance policies:
- Pacific Life – Best Cost For $1 Million Term Life
- Principal – Great For High Issue Age
- Protective – Great For Long Level Term Length
- Symetra– Best For Term life Insurance Rates
- Transamerica – Best For Buyers In Their 50s
- AIG/American General – Great For Choices Of Term Lengths
- Banner Life/Legal & General America – Great for Long Level Term Lengths
- Haven Life – Great Rates For Buyers Under Age 45
- Midland National – Great for Living Benefits
- Penn Mutual – Great For Older Buyers of 30-Year Term Life
What Is Term Life Insurance?
With term life insurance, you get to pick how long you want to lock in your premiums. Term lengths of 5, 10, 15, 25, and 30 years are common selections.
You can typically renew the policy annually (up to a certain age) after the level term period expires, but the renewal costs are typically much higher than the initial life insurance premium. Because of this, it’s wise to accurately calculate the ideal term length when purchasing insurance.
Additionally, you will select the amount of coverage you want, which can reach the millions of dollars if necessary.
You will designate at least one beneficiary when you purchase a policy. Your beneficiary will receive a death benefit if you pass away while the policy is still in effect.
There is no refund if your policy expires while you are still alive, with the exception of cases in which your policy expressly offers a “return of premium” feature.
Pros and Cons of Term Life Insurance
These are a few possible advantages or disadvantages of term life insurance.
- Compared to other types of life insurance, like whole life insurance, term life is significantly less expensive.
- You can select a level term period that most closely corresponds to the duration of your need for life insurance.
- For the length of the level term, your premiums won’t change, so your budget won’t be surprised. Even if your health changes, your rates won’t alter.
- Term life insurance does not have cash value, so you are unable to withdraw or take out a loan against the policy as you would with cash value life insurance. Term life insurance is significantly less expensive than other types of life insurance in part because of its lack of cash value.
- The high cost of renewing term life insurance after the level term period ends will come with a hefty price tag if your policy allows for renewal.
- You will also have to pay more if you choose to purchase a new life insurance policy after your level term period has ended. This is due to the fact that you will likely age and develop new medical issues.
What Term Life Insurance Covers
All causes of death are covered by term life insurance, with the exception of suicide during the first two years of the policy. Life insurance covers deaths resulting from illness, disease, accidents, and old age alone.
What Term Life Insurance Doesn’t Cover
Here are some scenarios in which a death benefit may not be paid by a term life insurance company.
- Suicide that happens during the first two years of the policy’s existence.
- Death as a result of a cause misrepresented on the application for life insurance.
When To Choose Term Life Insurance
Those who require life insurance to pay off a specific large debt or for a limited time are better off with term life insurance. Term life insurance can be particularly alluring to young parents who need to protect their finances while raising kids.
Term life is frequently purchased over other forms of life insurance for the following reasons:
- Make up for lost revenue. to pay for their working years in order to provide “income replacement” for their family in the event of their untimely death.
- Clear your mortgage. to pay off a substantial debt, like a mortgage, over the course of many years for their family.
- Cover the cost of college. to guarantee there is tuition money for the years until children graduate from college.
- Pay for the last costs. to cover the expense of a funeral.
Factors Affecting Term Life Insurance Rates
Your choice of term length and coverage amount will determine the cost of your term life insurance. Typically, life insurance companies also consider factors that affect your expected life expectancy. The basis for the life insurance quote provided to a buyer is this assessment of “mortality.”
Cost factors for term life insurance consist of:
- Age and gender
- Credit and past bankruptcies
- Criminal record
- Driving record (such as DUIs and reckless driving convictions)
- Health history of your parents and siblings
- Height and weight
- Nicotine or marijuana use
- Past and present prescriptions
- Plans for foreign travel to certain countries
- Results of medical exam (if required)
- Risky hobbies such as scuba diving or skydiving
- Risky occupation
- Substance or alcohol abuse history or treatment
How to Determine How Much Life Insurance You Need
The American Council of Life Insurers estimates that there are roughly 60 million households in the country that are underinsured or uninsured, with an average coverage gap of $200,000. Use an online life insurance calculator to ensure that the life insurance you purchase has adequate coverage.
- In the event of your death, how much annual income would your dependents require?
- What is the duration of your dependents’ financial need?
- How much debt must you settle?
- What amount of tuition are you willing to pay for?
- To what extent would you like to contribute toward funeral costs?
- How much cash do you have on hand?
- What level of life insurance coverage do you currently possess?
- The calculator quickly determines how much life insurance you need to pay off your household debt and future expenses using these dollar amounts.
How to Choose the Ideal Term Length for Term Life Insurance
Selecting a term length is the next step after figuring out how much life insurance you actually need.
The primary consideration when selecting a term length is that it must be sufficient to fulfill your financial commitments. You should get a 20-year term policy at the very least if you need coverage to pay off your mortgage and you have 20 years remaining. Consider a longer term of 30 years if your mortgage only has 25 years left on it and you also want to make sure your new baby is covered for college.
Maybe you want to be covered until you retire, in which case your family could use the payout to replace your income. The first step is to determine your anticipated retirement age, bearing in mind that it has increased in the United States. A recent Gallup poll found that the average age of retirement for retirees is 61, up from 57 in 1991. Over the previous 28 years, American workers’ average target retirement age has increased from 60 to 66.
It’s crucial to select the ideal term length for your requirements for a number of reasons. Longer term rates are more expensive than shorter term rates, but in the long run, locking in your rates now for a longer term could save you a lot of money.
Renewing a term policy will result in significantly higher premiums if you decide you need to continue coverage after the term policy expires. Your age and health at that time will undoubtedly result in higher life insurance quotes than what you’ll be offered now, even if you decide to shop for a new policy.
How to Find the Best Term Life Insurance
It could be alluring to focus solely on the costs when looking for term life insurance. Although price plays a significant role, it is not the only one.
The following advice will help you locate the best term life insurance policy.
Compare Quotes From Multiple Life Insurance Companies
Your options for coverage and term life insurance quotes are significantly influenced by your age and health. To determine the actual best value, it’s critical to compare life insurance quotes from several providers.
Work with a knowledgeable life insurance agent who can help you find the insurers who will most likely offer you the best rates if you have health concerns. Smokers, marijuana users, and people with other “risks” (like a heart ailment or a DUI conviction) can also gain from collaborating with a knowledgeable life insurance representative.
Consider Coverage Features in Addition to Cost
Yes, price plays a big role in choosing a life insurance plan. However, don’t let price be your only consideration or you may fail to locate the ideal term life insurance plan and provider for your requirements. Here are some characteristics of term life insurance to consider:
- a feature that lets you convert your term life insurance policy into a permanent policy at a later time. If you decide to extend your life insurance coverage in the future due to health issues, you’ll be happy that you have this feature.
- benefits that provide you the opportunity to use your death benefit while you’re still alive for a variety of purposes. If you have a terminal illness in the future, for instance, you can deduct money from your own death benefit if you have an accelerated death benefit.
- Riders on life insurance policies that allow you to personalize a term life policy. In the event that you become disabled in the future, a waiver of premium rider, for instance, will eliminate your life insurance payments.
Ask About the Policy’s Accelerated Death Benefit
A type of living benefit offered by the best term life insurance companies is the accelerated death benefit, which lets you access your death benefit while you’re still alive if you become terminally ill. Some insurers also allow you to access your death benefit if you become chronically or critically ill.
If you use the accelerated death benefit, your beneficiaries will receive a reduced payout at the time of your death; the amount you can access and the qualifying rules vary by insurance company.
Find Out the Rules for Renewing the Policy
Term policies offer predetermined rates for a level term, like 10, 20, or 30 years. You make a set premium payment during that period. Up to a certain age, many insurers permit you to extend the policy after the initial level term period concludes. When weighing your options and looking for term life insurance, keep in mind that the cost of renewing term life insurance can be extremely high. Purchasing a long-term policy at the outset is preferable to relying on the possibility of a renewal down the road.
We conducted our own study and used information from AccuQuote, a well-known online life insurance provider, to identify the best term life insurance. Having been in operation for more than 30 years, AccuQuote exclusively partners with insurance providers that have the highest ratings for financial stability. We assessed twenty businesses using these metrics:
- Cost (80% of score): We assigned weight to this category because many consumers looking for term life insurance have price as their top concern. Based on each company’s rates for men and women in their 30s and 40s for terms of 10, 20, and 30 as well as coverage amounts of $250,000, $500,000, $1 million, and $2 million, we calculated costs.
- Companies received points for their guaranteed renewability (10% of score) if their term life policies could be renewed at the end of the level term period.
- Conversion of term life insurance to permanent life insurance (10% of score): Businesses received points for this feature.