Life Insurance | knowing your family will be financially secure

Best Life Insurance Companies 

Life insurance is all about peace of mind, knowing your family will be financially secure without you.

Life insurance can ease your loved ones’ financial worries if you die unexpectedly, but it’s just as essential for your own peace of mind. In short, life insurance helps replace your lost income after you pass away, keeping any beneficiaries you name insulated from major money troubles after you’re gone.

Unfortunately, life insurance is among the more complex financial products on the market, but it’s also one of the most important. It’s essential to understand the different policy types before you buy.

Term life insurance

A term policy is life insurance at its most basic. It’s also the most affordable type of coverage. Just as the name suggests, you get a term life insurance policy for a fixed amount of time: 10 or 20 years, for example. If you die during your policy’s term, any beneficiaries you’ve designated will receive benefits.

Term life’s biggest downfall? If your policy ends and you’re still alive and kicking, the insurance company keeps your money — you get nothing in return. It can also be difficult to qualify for a reasonably priced term life policy if you’re older, have known health issues, or are at higher risk for health issues because of smoking or obesity, for instance.

On the flip side, term life can be quite affordable if you’re younger and don’t have any major health issues. Here are the quotes I received to insure myself, a 34-year-old nonsmoker in excellent health, with a 20-year, $500,000 policy.

Whole life insurance

Whole life insurance is a bit more complex and comprehensive than term life insurance. Like term policies, whole life insurance pays a death benefit if you pass away. But, unlike term policies, whole life policies cover you for your entire life. You’ll pay the same bill every month, and as long as you’re paying, your coverage can’t be canceled.

There’s another benefit, too: Your insurer socks away a portion of your payments in an account that builds cash value tax-deferred, and you can actually borrow against this without paying taxes.

How much more expensive? Many companies don’t offer whole-life quotes online, but State Farm quoted me $521.55 a month — more than 10 times their quote for term life.

In a survey of major insurers, Wealthfront found that a 30-year-old male could expect to pay up to $800 a month for a whole life policy. This automatically puts whole life out of reach for many people.

Another consideration: Although a portion of your premiums will be invested, you generally have no control over how it is invested. Many financial experts warn that you’re unlikely to be impressed by the returns, which might be frustrating if you want to get more hands-on with your investments.

Universal life insurance

The basics of universal life insurance are similar to those of whole life policies. You pay your premium as long as you’re alive, and the policy is guaranteed to pay a death benefit when you pass away. Like whole life insurance, some of the premium is invested on your behalf and the same tax benefits apply.

However, with universal life insurance, you have more control over the particulars of your policy. You can adjust the amount paid out as a death benefit, and you can generally alter the amount of your premium and how often you pay it, too. Like whole life insurance, your policy will have a cash value you can borrow against, and you can even use this to foot the bill for your premiums. Variable plans even let savvy investors control where their money is going.

Again, cost is the major downside here. Universal life insurance is pricier than term coverage, though generally not as costly as whole life insurance. For example, a very healthy 40-year-old man may pay around $3,000 a year for universal life, but just $350 for a $500,000 term policy, according to CNN Money. (State Farm quoted me $493 a month for a $500,000 level death benefit policy.)  And as with whole life insurance, you might not be satisfied with the rate you earn on the invested premium.

Except in special circumstances, term life is probably going to make the most sense for most people. Why? It’s simple to understand and easy to compare across insurance companies. It’s much more affordable than whole or universal policies, and the death benefit gives you the most bang for your buck. Finally, term life insurance doesn’t lock you into an investment vehicle that may not give you the best returns.

There are rare cases where whole or universal policies might be worth a look. If you’re wealthy and looking for investments where you can grow your money tax-free, these policies can be a solid option if you’ve already maxed out your retirement savings.

Those who expect to owe a lot of estate taxes can soften the blow by transferring their paid-off policy to someone else, too. Finally, some financial experts recommend looking at whole or universal policies if you don’t have the discipline to simply buy a term policy and invest the rest of your money.

Remember, life insurance is meant to give your beneficiaries a financial cushion in the event of your untimely death. If no one is depending on you and your income, you may not need life insurance at all. This holds true regardless of age.

One thing to think about, however, is whether you want to leave family members on the hook for your funeral expenses or debts for which they’ve cosigned. In that case, you may want an inexpensive burial or term policy.

How much life insurance should I buy?

Your magic number will vary according to your circumstances, of course. For a rough estimate of how much life insurance you need, some insurance advisers simply tell you to multiply your income times 10.

However, that doesn’t take into account potentially crucial information, including how many dependents and the type of debt you have.

For a more accurate number, you’ll need to consider several factors, like how much your spouse and any children will need to maintain their standard of living without your income, whether any of your children will need help with college, and what your mortgage and other debts are.

How I Chose the Best Life Insurance Companies

I looked at several factors in my search for the top life insurance companies, including customer satisfaction surveys, the online experience, coverage options, and the insurer’s financial strength.

• Customer satisfaction: It’s difficult to pick an insurance company based on individual online reviews, which can trend positive or negative due to highly personal circumstances. It can also be hard to isolate customers’ experiences with life insurance versus other policies a company may offer, including car or home insurance.
• Financial strength: I looked at each company’s A.M. Best rating to gauge stability. Ratings range from A++ (superior/most stable) to D (poor/least stable). A few special ratings below “D” denote companies that are under regulatory supervision, are being liquidated, or have had their ratings suspended. A.M. Best considers any company with a “B” grade or below vulnerable.
• Ease of getting a quote: While most life insurance companies make it easy to get a quote for at least a term policy online, some still require you to call an agent. In this day and age, I consider that a big downside. For those that do make quotes available online, I compared how quick the process was and how much information I had to input to receive a quote.
• Range of coverage options: I determined whether the company offered all major types of life insurance — term, whole, and universal — and checked how many plans were on offer. I also considered how flexible those plans were and whether they offered any unique benefits.
• Price: For term insurance, I compared quotes for each company’s most basic policy. I made sure to use the same details (female, 34, nonsmoker, excellent health, 20-year term, $500,000 in coverage) for as much of an apples-to-apples comparison as possible.

Read on to discover why these companies stand out from the competition. Further down, I’ll explain how I made my picks. I’ll also provide a primer on life insurance types so you can make sure you’re shopping for the right product. Once you’re ready to start your search for a life insurance company, the quote tool below can help you find the best deals in your area.

One of the largest insurers in the nation, State Farm is also consistently rated one of the best. In fact, it was the only company to earn the highest rating in every category of J.D. Power’s 2015 customer satisfaction survey.

It’s also on rock-solid financial footing, earning A.M. Best’s highest-possible A++ rating. State Farm also shines with a consumer-friendly business model that combines online convenience and, if you prefer, a more personal, agent-driven experience.

Who it’s best for: If you prize customer service, State Farm might be your best bet. Aside from its top-notch J.D. Power ratings, the insurer’s huge network of 18,000 agents all but guarantees there will be one near you if you want face-to-face service. State Farm also makes it easy to shop for a policy online. Their website is user-friendly, requiring a minimum amount of identifying information before getting quotes for different kinds of policies all on one page.

Who should skip it: If you’re on a budget, take note: State Farm offered one of the pricier term life quotes that I received. At nearly $40 a month, I would pay double for a State Farm policy over the cheapest quotes I received. Ouch.

Many customers choose term life insurance because it’s their most economical option.Transamerica offered one of the lowest quotes I received: $21 a month for a 20-year, $500,000 term policy.

Who it’s best for: Anyone who is watching their budget or wants the opportunity to choose a more flexible term life policy should check out Transamerica, which got 4.5 out of 5 stars for value in Insure.com’s most recent life insurance rankings. The company is also worth a look for anyone who’s unsure of what kind of insurance they need: A helpful “plan explorer” feature lets you answer questions about your family, finances, and health to receive personal recommendations.

Who should skip it: If you value service over price, note that Transamerica ranks in the middle of the pack in J.D. Power’s latest customer satisfaction rankings.

want a guarantee of financial stability, it doesn’t get much better than State Farm’s A++ A.M. Best rating. And as I mentioned above, strong customer service rankings and an extensive agent network make State Farm a good bet for anyone who wants a better buying experience.

Who should skip it: Again, State Farm doesn’t have the best reputation for cheap policies — shop around if you’re watching your budget. However, note that current customers are still pleased with what they receive for the money: The company gets top marks for pricing and value in both the J.D. Power and Insure.com surveys.

Best Universal Life Insurance Company: Prudential

Prudential particularly excels when it comes to universal life for two major reasons. First, it offers online quotes for universal life insurance — most companies require you to call an agent. Second, it offers a comprehensive range of five universal life policies that are easy to directly compare online. Fixed, variable, and return-of-premium death benefits are available. Prudential also has strong financial ratings.

Who it’s best for: Like whole life, a universal life policy will be with you until you die, assuming you continue to pay your premiums. Prudential has an A+ financial strength rating with A.M. Best, so it’s a good bet if you want to be sure the insurer will be around when you need it. Prudential’s universal life offerings are also more extensive than most and easy to compare, so the company could be a good pick for someone who needs a more flexible or niche plan.

Who should skip it: If you’re still comparing whole and universal life policies, take note: Prudential does not offer whole life. And if you’re nervous about service, Prudential was in the middle of the pack in the latest J.D. Power customer satisfaction survey, notching below-average ratings for customer interaction.