Choosing the best life insurance company is an important financial decision. A good life insurance policy can help protect your family from financial difficulties if you die unexpectedly. It can provide money for mortgage payments, household expenses, education costs, debts, and other financial obligations.
There is no single life insurance company that is best for everyone. The right choice depends on your age, health, budget, desired coverage amount, policy type, financial goals, and the needs of your beneficiaries. The National Association of Insurance Commissioners (NAIC) recommends comparing similar policies from different insurers and considering the financial stability of the insurance company before purchasing coverage.
What Is Life Insurance?
Life insurance is a contract between you and an insurance company. You pay premiums according to the terms of the policy, and the insurer provides a death benefit to your beneficiaries if you die while the policy is in force.
The death benefit can help replace lost income and provide financial support for people who depend on you. Depending on the policy, life insurance can also provide additional features such as cash value accumulation.
The two broad categories most consumers compare are term life insurance and permanent life insurance.
Best Life Insurance Companies: What Should You Compare?
When searching for the best life insurance companies, don’t focus only on the cheapest quote. A low premium is useful, but the policy’s financial strength, coverage terms, exclusions, customer service, and flexibility can be equally important.
Important factors to compare include:
- Financial strength and ability to pay claims
- Life insurance policy options
- Premium costs
- Coverage amounts
- Policy term lengths
- Conversion options
- Underwriting requirements
- Riders and additional benefits
- Customer service
- Claims experience
- Availability in your state
The NAIC recommends checking that an insurance company and agent are licensed in your state before purchasing a policy.
Best Companies for Term Life Insurance
Term life insurance is often the first option people consider when they want affordable protection for their families. A term policy provides coverage for a specific period, such as 10, 20, or 30 years. If the insured dies during the covered term, the beneficiaries generally receive the policy’s death benefit.
Term insurance is generally less expensive than permanent life insurance because it provides protection for a specified period and typically does not build cash value.
Term life insurance can be particularly useful for parents, homeowners, and people who want to replace their income during their working years.
Best Companies for Whole Life Insurance
Whole life insurance is a form of permanent life insurance designed to provide coverage throughout the insured person’s lifetime as long as the policy remains in force.
Unlike traditional term insurance, whole life policies can build cash value. They generally have scheduled premiums and can provide a combination of death-benefit protection and cash-value features.
Whole life insurance can be appropriate for people who have long-term financial objectives and are comfortable paying higher premiums for permanent coverage.
However, it is important to understand the policy’s costs, guarantees, cash-value provisions, and other terms before purchasing.
Best Companies for Universal Life Insurance
Universal life insurance is another type of permanent life insurance. One of its distinguishing features is premium flexibility, although the policy must receive sufficient funding to remain in force.
Universal life policies can have more complicated structures than basic term insurance. Depending on the specific product, cash value may be affected by interest rates, policy charges, investment performance, or other factors.
Consumers should carefully review how premiums, cash value, guarantees, and policy expenses work before purchasing a universal life policy.
Term Life vs. Permanent Life Insurance
The choice between term and permanent coverage depends largely on your financial goals.
Term life insurance may be suitable if you primarily want affordable protection for a specific period. For example, a parent might purchase a 20- or 30-year policy to provide financial protection while children are growing up.
Permanent life insurance may be appropriate when lifelong coverage and cash-value features are important.
The NAIC notes that term insurance is generally intended to provide lower-cost coverage for a specific period, while cash-value insurance can provide longer-term coverage.
How Much Life Insurance Do You Need?
There is no universal coverage amount that works for everyone.
Start by considering the financial responsibilities your family would face if you died. These can include mortgage debt, personal loans, education expenses, funeral costs, everyday household expenses, and future income needs.
You should also consider existing savings, investments, retirement accounts, and other life insurance coverage.
For example, someone with substantial savings and no dependents may require considerably less coverage than a parent who is the primary income earner for a family.
The NAIC recommends considering factors such as financial dependents, debts, taxes, and other assets when determining your insurance needs.
How Life Insurance Premiums Are Determined
Life insurance premiums are based on several factors. Insurance companies generally evaluate information about the applicant to determine the expected cost of providing coverage.