Methodology: How we pick the best life insurance companies
We analyzed nearly 100 firms on our quest to find the best life insurance companies. Above, find those that came out on top. These companies offer various coverage options, competitive pricing, financial strength, high levels of customer service, and additional benefits.
SuperMoney's Guide to the Best life insurance companies
Are you ready to join the 60%
of Americans who have life insurance? A life insurance policy can give you peace of mind and help you diversify your investment portfolio. The first step is finding the best life insurance company for your needs. Not sure where to start? We can help.
Learn all you need to know about life insurance, how it works, and how to choose a provider below. Plus, browse our list of the best life insurance companies based on financial strength and reviews from hundreds of users.
Frequently asked questions about life insurance
Wondering how a life insurance policy can help you? Here are answers to the most frequently asked questions on the topic.
What is life insurance?
is a contract between you and an insurance provider. You pay an amount each month and, in return, a beneficiary (or beneficiaries) receive a lump-sum payment after your death.
The payment is known as a death benefit
, and it's meant to help your loved ones after your passing. For example, this could be important if you are the breadwinner in your home so your family can cover their expenses. It can also help cover funeral costs.
Beneficiaries can use the death benefit proceeds how they see fit. A perk of life insurance is that the death benefit is not subject to income tax.
How does life insurance work?
When you apply for life insurance, the insurer will analyze your situation. It will consider your age, gender, health history, occupation, hobbies, and habits. The purpose is to understand the level of risk you present and how long you are likely to live.
After this analysis, the company will determine the premium options available to you. It will often present you with various types of coverage with varying premium costs and benefits. Once you choose a plan and sign, your coverage goes into effect.
How much does life insurance cost?
Wondering about life insurance costs? Interestingly, almost half of the millennials in a study overestimated the cost of life insurance by 500%
In reality, the average premium for a life insurance policy is $44 per month, according to S & P Global. Further, if you are in your 30s and opt for a term life insurance policy, it could be as low as $16
While these are industry averages, keep in mind that your rates will depend on individual factors like age, gender, lifestyle, etc. Premiums can also vary between insurance companies, so it's important to shop around and get a few quotes.
Who needs a life insurance policy?
A life insurance policy is especially important if others, such as a spouse and children, rely on you for financial support. However, it can also help to reduce stress on others when you pass away.
Examples of possible expenses a death benefit can cover include:
- Private student loans if your parents are co-signers.
- Business expenses.
- Funeral costs.
- Estate taxes for heirs.
- Other situations where loved ones inherit your debt.
This makes life insurance helpful for some people. You can tap into your policy's cash value for big life expenses like buying a house or sending your kids to college.
What are the different types of life insurance policies?
There are two major types of life insurance
Term life insurance
Term life insurance
is, as the name implies, a type of life policy designed to cover a specific period of time. So instead of having coverage until you pass away, you can get coverage for a period that often ranges from five to 30 years.
If you die within the term, a death benefit will be paid out to your beneficiary. However, once the term ends, the benefit is gone, and you will need to sign up for another policy or convert yours to a permanent policy to keep coverage.
Another difference between term and permanent life insurance is the cash value factor. Term life insurance policies do not come with it (more on that below).
The upside to a term life insurance policy is that it will often be significantly cheaper than a whole life policy.
Looking at the national average premium costs, term life insurance was less than half of the cost of whole life insurance.
Permanent life insurance
Permanent life insurance coverage, such as whole and universal life insurance, provide lifelong coverage, and will usually include a cash value component. The cash value of a permanent life policy increases over time and can be used to pay premiums or take out a loan from the insurance provider.
Whole life insurance
and universal life insurance coverage are two types of permanent life insurance. They can provide you with coverage for the rest of your life, as long as you continue to pay the premium as agreed. When you pass away, the death benefit will go to your beneficiaries.
Do you need a medical exam to get life insurance?
A medical exam is a common part of the process when getting life insurance. The insurance company needs to assess the risk you present to determine how much your policy should cost.
Common tests, as part of a medical exam for life insurance, include:
- Blood pressure
- Diseases including HIV/AIDS
- Glucose levels
Often, if you've had recent serious health issues or have a complicated family health history, you'll be looking at higher rates. Conversely, those with excellent health, the ideal weight-to-height-ratio, and a clean family medical history will get the best rates.
While a medical exam is more the norm than the exception, not all insurance companies require them.
What is whole life insurance?
Whole life insurance has an investment component built into the life policy. Each premium payment you make is split between the insurance coverage cost, the fees, and contributions to your cash value. The cash value then grows over time with interest.
You can cash out your policy at any time and withdrawal its cash value, minus fees. Doing so will surrender your death benefit. You can also borrow against your cash value. However, if you pass away before you repay the loan, the outstanding balance will be settled by subtracting the amount from your death benefit. When you pass away, your cash value is surrendered to the insurance company, and your death benefit is paid out.
Whole life insurance is most advantageous when bought in the earlier years of life as you have more time for the compounding interest effect to work in your favor.
Whole life insurance also often comes with the potential to earn dividends. If the insurer makes more than they need to run the business, they will pay the excess out to policyholders. The amount you receive depends on your cash value.
Whole life is often more expensive than term life, but it also comes with the perks of lifetime coverage, the cash value benefit, and potential dividends.
What is universal life insurance?
Universal life insurance is a type of permanent life insurance that, wait for it, lasts your entire life. With universal life insurance, your monthly payments are split into two parts. One part covers life insurance, and the other part is invested. The biggest advantage of universal coverage when compared to a whole life policy is that it allows policyholders to choose how much premium they pay within a certain range. The minimum amount is set by the cost of insurance. Anything you pay above the minimum is added to your cash value, which is typically guaranteed to increase based on a minimum annual interest rate set by the insurance company. This growth can increase if the market is doing particularly well.
In most cases, policyholders will choose to pay the maximum premium possible in the early years so they can build a larger cash value. This cash value can be used to cover premiums later. The downside to this is that the cost of insurance increases as you age. You need to make sure you have enough cash value to pay the minimum if you stop making monthly payments.
What types of cash value permanent life insurance are there?
There are also various types of permanent life insurance policies with cash value components, including whole life insurance, universal life insurance, indexed universal life insurance, and variable life insurance. The difference between them comes down to how the cash value grows.
With whole life insurance, your cash value builds at a fixed rate set by the insurer you choose. Typically, it's set up to reach the amount of the death benefit by the time the policy matures. Policy maturity often happens when you reach the age of 100.
Universal life insurance policies have cash value components that grow based on market interest rates and the performance of the insurer.
Indexed life insurance policies offer cash value benefits where the performance depends on how an index such as the S&P 500 performs.
Variable life insurance enables you to invest the cash value component in portfolios provided by the insurer.
These plans can also differ in other ways. For example, when comparing whole and universal life policies, whole offers guaranteed premiums and cash value accumulation while universal comes with more flexibility. The right choice for you can depend on your financial stability and the level of risk you are willing to accept.
Is term or whole life insurance better for me?
Deciding whether term or whole life insurance is better for you depends on your situation.
The case for term life insurance
Term life insurance can provide you with the security of a death benefit during the years you need it most. For example, if you are married, have young children, and just bought a house with a 30-year mortgage. A 30-year life insurance plan could provide your family with support to pay off the home and support the kids until they are adults. Your need for coverage may be reduced after the 30-year term.
Term life insurance can also be a helpful solution if you are on a very tight budget but still want coverage. It offers the most affordable premiums.
Additionally, if you are investment-savvy, going with a term life insurance policy can enable you to pay less for your coverage. You can then invest the difference outside of insurance products to gain a larger return.
The case for whole life insurance
Whole life insurance
is best for those who want lifelong coverage, along with the benefits of the cash value feature. It can be particularly appealing if you want to help your heirs pay inheritance or estate taxes.
Additionally, it can provide peace of mind if you have a lifelong dependent, such as a family member with disabilities.
Further, it's a way to spend your retirement savings and still pay for your final expenses while also leaving an inheritance to your beneficiaries.
The cash value can also be a helpful financial tool to help you accomplish goals throughout your life.
The right fit for you will depend on your specific situation.
Is life insurance worth it? What are the pros and cons?
More than half of U.S. adults have life insurance. It comes at a low monthly cost and provides peace of mind that your family will have their needs met in the case of your passing.
Here's a closer look at the pros and cons:
Weigh the risks and benefits.
Life insurance pros
- Gain peace of mind that your beneficiaries will be financially supported with death benefits when you pass away.
- Death benefits are usually income-tax-free for beneficiaries.
- Cash values grow tax-deferred during the insured person's lifetime.
- Policies are generally flexible, making it easy to adjust according to the policyholder's needs.
Life insurance cons
- Policyholders must pay premiums to receive the benefits.
- Cash surrender values are often less than the amount paid if the policy is cashed out within the first several years.
- Finding the right plan and best life insurance company can be a challenge.
Which is the largest life insurance company in the world?
The size of life insurers is usually determined by their market share (i.e., the number of policyholders they have) and how much money they receive in policy payments. As of 2021, the life insurance company with the largest market share and most money received in direct written premiums is Northwestern Mutual. New York Life and Metlife (Metropolitan Group) came in second and third.
Although it is true that companies with more assets and market share are usually more solvent, going with a larger life insurance company over a smaller one is unlikely to affect your policy since policy premiums are regulated by the state government. This means policyholders will pay roughly the same amount for similar policies amongst all life insurance products and companies.
Having said that, larger life insurance companies are more likely to offer higher coverage amounts than smaller companies. Larger companies are also less likely to go bankrupt.
How do I compare life insurance companies?
When comparing life insurance companies and their individual life insurance policies, here are a few key things to keep in mind.
- Customer service: You can gauge the overall value that a life insurance company offers by looking at their level of customer satisfaction. Sites, such as SuperMoney, collect reviews in one place so you can quickly gauge the level of customer service being offered.
- Cost: The cost of the service is an important factor as it will directly determine if the value is worth it or not. Get quotes from various providers and compare the premium amounts alongside the other factors.
- Insurance products: Compare the life insurance policies on offer by various providers. While most will over their version of both a term policy and whole life policy, they can vary in the fine print and the audience they target. Be sure to look into the cash value and death benefit details, as well as any exclusions.
- Financial strength: Life insurance is a long-term investment. It's important that the company you choose will be in the business long term. To gauge a company's financial strength, you can look them up using financial strength ratings, such as A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s, and Standard & Poor’s.
- User experience: Another aspect that is becoming more important is the user experience online. Many will open and manage their life insurance policy online, so the provider must have a user-friendly website.
Can you borrow money from your life insurance policy?
You can only borrow against a permanent or whole life insurance policy. Term life insurance, a cheaper and suitable option for many people, does not have a cash value and expires at the end of the term, generally anywhere from one to 30 years.
Find the best life insurance company for you
The best life insurance company
for you may not be the same as for the next person. It all depends on your unique situation, which depends on your age, health, financial goals, and assets.
Your best bet is to shop around with leading providers and compare the best life insurance companies. Make a shortlist of your top picks and get quotes. Compare the overall value of your shortlist's offerings to find your best fit!
How do I choose the right life insurance company?
For most people, the best life insurance company is the one that offers the coverage they need at the cheapest cost. After you know how long your policy should last and how big the benefit should be, use price as the starting point. You can also look at different factors like third-party financial ratings, customer reviews, and what tasks you're able to do online if you're having trouble deciding between companies.
Should businesses consider life insurance for their key employees?
Many companies would benefit from purchasing life insurance for key employees when planning for business continuation and succession planning. Seven out of 10 small businesses surveyed by the National Association of Insurance Commissioners said they were very dependent on one or two key people for the success of their business. However, only two out of 10 had key person life insurance in place.
How do I find the cheapest life insurance company?
Picking out a life insurance policy can be tough. There are so many different options to choose from, and it all depends on what your family needs. Figure out what is more important to you.
Do you value having all your insurance products bundled in one company? Is a lower monthly premium or a higher coverage more important to you? Whichever it is, all of the companies on this list make great options when it comes to life insurance. It is important to do your research so that you can choose wisely and go with the company you feel is best. Remember, life insurance is not one size fits all, so a policy that works for your friend might not work for you.
Find the cheapest company by comparing policies from multiple companies. Life insurance cost is based on your age, health, and the policy's term length and death benefit amount. Some companies are more lenient than others for certain health conditions, and you can save up to 40% by making sure you're going with the right company for your individual circumstances.