The higher the coverage amount and longer the term, the more expensive the policy. Most people choose a term and benefit that will cover their biggest and longest debt; for many, that’s their mortgage, but also consider the cost of sending kids to college, caring for aging parents, and retirement for your partner.
➞ Want more? Read our full guide on how much life insurance you need.
Finally, while term life insurance is simple, it can be customized with riders. For example:
- A term conversion rider will automatically turn the policy into a whole life policy at the end of the term.
- A return of premium will refund all premiums at the end of the term.
- An accelerated death benefit can be accessed early in cases of terminal illness.
Customizing a policy helps it fit your needs, but some riders are unnecessary and others come at an additional cost. Know what riders you need, what riders a particular company offers and what, if anything, it costs before you settle on a policy.
➞ Want more? Read our full guide on life insurance riders.
The best whole life insurance companies & policies
Whole life insurance is a type of permanent life insurance. It doesn’t expire, and it has an investment-style cash value component.
Whole life can be a good option for people with complex financial situations, so you should know how to pick the best company and policy.
Whole life insurance is more expensive
The first important consideration with whole life insurance is cost; a whole life policy is six to 10 times as expensive as a comparable term life policy, so be sure it fits into your budget.
As you can see, whole life insurance costs considerably more for less coverage compared to term.
➞ Want more? Read our full guide on term vs whole life insurance.
Understand the cash value
Second, consider the financial strength of whole life carriers. This is important to keep in mind regardless, but unlike term life, you can own a whole life policy for as long as you need it. That means it’s even more important to know that a company will still be around for a long time when you’re talking about whole life.
Be sure to know the terms of the cash value component. Every whole life policy has a guaranteed interest rate; know what it is with the company you’re considering.
Also take dividends into account. The strongest whole life policies are usually from mutual companies (like MassMutual, Guardian or Northwestern Mutual) that pay dividends, that can be used to increase the cash value, pay for the policy, or for retirement.
Make sure your policy won't lapse
Finally, ask how the policy handles lapse prevention. A whole life policy can automatically pay premiums using the cash value. This keeps the policy from expiring, but also lowers the cash value amount available to you, so it’s important to know how your policy handles a lapse.
Choosing the best life insurance company
When selecting a life insurance company, take into account:
- Their cost
- Their features
- The individual policies they sell
Term life insurance is typically very affordable — less than $40 a month for many people. Other types of life insurance, like whole life, cost considerably more.
Be sure to get life insurance quotes for multiple companies. Captive agents work for only one insurance company and have limited options available. An independent agent or broker like Policygenius , who works with multiple life insurers instead of just one, can help you with this. Comparing insurance policies to find the best price can save you tens of thousands of dollars over the life of the policy.
And remember, your age, health, and hobbies affect your cost, so use our guides above to find the companies that work best for your individual situation.
Not all life insurance companies operate the same way. It’s important to find one that fits your needs so dealing with them is a hassle.
Depending on the carrier, some steps in applying for or updating policies are only done via paper mail or on the phone, while some are done online. Be sure to find a life insurance company that works the way you do. This might mean deciding between a more modern company like Haven Life or an established old-school carrier like Northwestern Mutual or Mutual of Omaha.
Besides the paper versus phone versus electronic consideration, shoppers should take into account the carrier’s:
- Average application time— From application to in-force policy, the process can take up to eight weeks, but many carriers often complete the process much quicker. Knowing if a particular company is typically faster or slower than other companies helps set your expectations.
- Accepted payment methods— Most carriers accept paper checks, while some allow bank drafts (but/only/if you’re paying monthly), and some allow you to use a credit card only on your first premium payment. Plus, certain forms of payment may not be available in all states.
What is the right policy for you? Most people will need to decide between term and whole life insurance (and choose term) but there are other options like return of premium, no-medical exam, and variable policies. A licensed agent can help you decipher your options.
Companies also offer different riders. Every carrier won’t offer every rider, and riders aren’t always necessary and may increase the cost of your policy. If you’re just looking to care for your family or cover funeral expenses, a basic policy will work.
Finally, look at the coverage limits. Some carriers have a minimum term length, and some only let you choose terms in increments of five or 10 years. There might also be death benefit minimums to take into account.
Life insurance company ratings & reviews
There are many third-party groups that provide ratings and reviews based on different criteria. Some provide customer service-related ratings, like J.D. Power scores and Better Business Bureau (BBB) ratings.
Other groups, like A.M. Best, Fitch Ratings, Moody’s, Standard & Poor’s and Weiss Ratings are judges of financial strength.
The most common life insurance ratings come from:
- J.D. Power: J.D. Power ranks some (but not all) of the top life insurance companies on customer satisfaction on a scale from 1 - 1,000.
- BBB: Customer satisfaction score ranging from A+ to F based on BBB’s own formula of 17 factors.
- A.M. Best: Financial health rating, with A++ and A+ being “superior” and A being “excellent”. Learn more about A.M. Best here.
Most of the biggest life insurance companies are financially secure, and while you should look at BBB ratings, keep in mind some reviews may be from customers who had particularly positive or negative experiences that aren’t necessarily representative of the company in general. The best-rated life insurance companies have high marks all around to provide peace of mind.
Shoppers can also see how big a company is by looking at its market share and number of policyholders. Size is typically a good indicator of how well a company is doing, but shoppers shouldn’t be afraid to go with a smaller insurer, like a regional carrier or a membership carrier (like USAA), if it fits their needs.
What you shouldn’t worry about
Most concerns about life insurance – and insurance in general – is that a company won’t be there to pay out when it’s needed. After all, what’s the point in having life insurance if the death benefit isn’t available?
But companies going bankrupt or not paying out are two things you don’t need to worry about.
Financial ratings are a good indicator of the likelihood of bankruptcy, but they don’t tell the whole story. Even if a company does go bankrupt, there are three safety nets in place.
- Life insurance companies have reinsurance– insurance for insurance companies. Reinsurance spreads out risk so a company doesn’t have the entire burden alone, and if a company goes bankrupt, they aren’t fully on the hook.
- Life insurance companies are part of guaranty associations. That means if one declares bankruptcy, other companies – also members of the guaranty association – pick up policyholders and guarantee their coverage continues and their needs are met.
- Life insurance companies are legally required to have reserve ratios; like an emergency fund, those reserves are cash on hand to cover their financial obligations.
Companies not paying
Keep in mind that there are certain scenarios where a life insurance company doesn’t have to pay out the death benefit. During the first two years of the policy, known as the contestability period, the carrier can dispute a payout if there’s suspected fraud.
Suicide also isn’t covered in the first two years, and carriers may not have to pay out in the case of criminal activity (like murder). Learn more about when and how life insurance covers suicide.
But companies not paying the death benefit shouldn’t be your concern when you’re looking for a life insurance carrier. You should focus on the policies they provide, the cost of coverage and customer service.