We insure just about everything that we hold dear in this world – our homes, our cars, our belongings and our pets. But many Americans go about their day to day lives without life insurance. Unlike some other forms of insurance, it’s not required but life insurance can be a worthwhile investment to protect your loved ones from financial worries should the worst happen to you. If you do decide to get yourself covered, then we’ve put together this guide for the best life insurance policies.
Modern life insurance is about more than just the benefits that your benefactors receive in the event of your death though, which makes working out the best life insurance policy for you a bit more complicated. Term life plans cover you for limited spans of time – usually between five and 30 years – and cover stops after that period unless you convert the policy to a whole life equivalent.
Similarly, some policies let you build cash value that you can use to help with things like paying for a child’s college education, making improvements to your home, or having a more comfortable or adventurous retirement. All of these factors can complicate the process of choosing a life insurance provider, so check out our guide below to find the best life insurance policy for you.
There are other questions too. Do you want to pay a guaranteed premium for the life of a policy, or do you want more flexibility than that? Some policies let you adjust premium payments and schedules to fit your life and budget, or to take into account your attitude to risk at different stages of your life.
All these are factors to consider as you shop for life insurance. At the same time, most providers cover most of these bases in one way or another, so to some extent your choice may come down to the provider itself.
What to look for? Good financial strength is a must, especially with a product like life insurance which might not be claimed for decades. Good financials mean companies shouldn’t have a problem meeting their financial responsibilities either now or in the future, assuming their circumstances don’t change dramatically in the meantime.
After that, it’s worth having a look at JD Power customer satisfaction scores and the number of serious complaints a provider attracts. We’ve included both of these in all our reviews. We wouldn’t advise using JD Power scores as your deciding factor, because the very best insurance for your circumstances might be provided by a company with an average ranking. But they help to paint an overall picture, alongside product range, financial strength and so on.
Finally, always gather a number of quotes before making an informed choice.
With all these factors in mind, here’s our pick of the best major life insurance providers in 2020.
Excellent financials and customer satisfaction make Northwestern an easy provider to recommend. There are plenty of people who would tell you that Northwestern Mutual offers the best life insurance on the market – at least in terms of major nationwide providers – and its customer satisfaction scores would seem to bear them out.
In the most recent annual JD Power survey of the 23 largest life insurance providers in the country, Northwestern received a score of 810 (out of 1,000), putting it at the top of the table. In addition, it offers a wide range of standard policies and one or two non-standard options too. You don’t necessarily come to Northwestern for innovative products though. You come for exemplary customer service and support.
State Farm’s financial strength is rated at A++, which means it is never going to have trouble fulfilling its obligations to customers, and it has excellent ratings from JD Power. But what we really liked are its innovative products, and especially its “Limited Pay Life Plans” for 10, 15 or 20 years, which let you pay completely for your life insurance premium in the term you choose, meaning you have nothing to pay during retirement.
In addition, when it comes to whole life insurance, State Farm offers more policy discounts than many other insurers.
“Everyone deserves a Guardian,” says Guardian Life, and the company boasts serious financial strength (A++ rated) and reasonable customer satisfaction scores. It stands out if you’re looking to accumulate cash value. It offers eight different cash value options, more than many other providers.
It also has a great website. Its cartoony illustrations are a breath of fresh air in a world dominated by cliched happy family stock shots.
John Hancock is the only major provider we’ve come across to reward policy holders who commit to healthy lifestyles. Its Vitality wellbeing scheme stands on its own. Two Vitality options (one free, one costing a small monthly fee) offer fitness and nutrition information and reward healthy activities like exercise and medical checkups with discounts to Amazon.com and outdoor retailer REI. It also offers free or reduced wearable fitness devices, and even an Apple Watch.
We liked the flexibility of Pacific Life’s policies. Pacific Life offers a variable universal policy, allowing you to adjust your policy’s investment allocations to meet your own growth objectives and risk tolerances. It also offers two types of term life policy. Best of all, Pacific Life offers life insurance with long-term care benefits. This allows the policy to be used for long-term care, with the death benefit reduced as a result.
This question is always followed by another: How much coverage do you need? The amount of coverage you need determines how much you pay in monthly premiums. For example, a $250,000 term life insurance policy can cost close to five times less than a $1,000,000 policy. Your premium also depends on your gender, age and health. A healthy woman can expect to pay around $20 a month for a $250,000 policy, while a healthy man can expect to pay around $25 a month. Whole life policies, which include a savings account that builds value, are more expensive and cost between $100 and $500 a month.
Life insurance is a grim subject – no one wants to think about dying, much less how their family will be provided for when they’re gone. But when you get a life insurance policy, your family will continue to receive an income as well as have money to pay for funeral expenses and your children’s future educational expenses.\
How much do you need?
According to the American Council of Life Insurers, most experts recommend getting a policy that pays between seven and 10 times your annual income. Depending on your age, income, savings and other factors, you may need more or less. There are many online calculators that can help you figure out how much you need in insurance as well as how many years your policy should last.
Generally, the older you are, the more likely it is a shorter policy will be useful. If you have enough savings, a good retirement plan and low debt, a lower limit policy is a good option. When you call for a quote, the agent will ask you questions about your financial situation, health and plans for beneficiaries before making recommendations.
What type of policy should you get?
There are two main types of life insurance policies: term and permanent. A term policy is the most common and most affordable. It covers you for a certain amount, called the face value or death benefit, for a set period of time. A $250,000 policy with a 20-year term will pay your beneficiaries $250,000 if you die at any time during the 20 years the policy lasts.
A permanent policy doesn’t expire and instead lasts for as long as you pay the premium. A permanent policy is guaranteed to pay out the claim. It’s not an if – it’s a when. In addition to the death benefit, a permanent policy has a living benefit that builds value each year. A portion of your premium is put toward building the value of the living benefit. A permanent policy is much more expensive than a term policy, often costing up to 10 times as much.
A good way to think about the differences between term and permanent life insurance is to compare it to renting versus owning a home. Renting can be cheaper, but it’s temporary and doesn’t build any value. Owning a home is more expensive, but you build equity and long-term value.
When you shop for life insurance, you’re asked to choose between a term and a permanent policy. There’s a lot of confusing terminology, and different types of permanent policies can be complicated. A term policy is straightforward – it pays out a certain amount if you die during the length of the policy. If you’re considering a permanent policy instead, here are some pros and cons to consider:
Pro: These policies never expire. Unlike term life insurance, which lasts up to 20 years, a permanent policy does exactly what the name suggests and doesn’t expire. It lasts for either as long as you live or as long as you make payments. If you do miss payments, you may end up relinquishing some of the policy’s cash value.
Con: These policies are expensive. When we got quotes, the permanent policies were two to five times more expensive than the term policies. Yes, much of your payment goes toward increasing your policy’s long-term value, but the higher monthly payments may be outside your budget. Keep in mind that factors like age, gender and health help determine your monthly premiums.
Pro: There are savings benefits in addition to policy payout. Term life insurance pays out a set amount if something happens to you during the policy’s term. Permanent life insurance has a savings element that accrues value over the life of the policy. This can increase the death benefit paid out to your beneficiaries, and you may be able to access it in other ways, depending on your policy.
Con: The policies are complicated and confusing. Permanent life insurance is complicated, and it can be hard to comparison shop because there’s a lot of variance between providers. In addition, there are many subtypes, such as whole, universal, variable and indexed universal, that have different ways of building your policy’s cash value.