The Best Term Life Insurance
Important protection for your most important people
Your life insurance depends a lot on you: your income, your lifestyle, your family. But according to the insurance experts and financial advisors we talked to, the best providers will all have flexible term lengths, easy ways to extend your policy, and robust riders that will help plan for the worst.
A term life policy with TIAA can convert into a permanent policy at any time without further evidence of insurability. How's that for peace of mind?
New York Life
Pick a term, any term.
Amica Life Insurance
Gets the award for standout rider.
Life insurance is one of those things — like 401(k)s and cellulite — that’s impossible to grasp when you’re young and then hits you like a ton of bricks the second reality sets in, often right around when you have your first kid. If there are people in your life who depend on your income, life insurance is likely an essential part of your long-term financial plans. Our pick for best term life insurance, TIAA Life, is financially secure, so you know it’ll be there when you need it, and flexible enough that a policy can be a practical addition to your budget. Every company ranks risk factors differently, so to get the best price, you’ll need to compare quotes.
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There are two major types of life insurance: term and permanent (also known as whole life).
Term life insurance only provides coverage during a set timeframe, and typically expires with no cash value. Whole life insurance is just like the name says: good for your whole life, as long as you keep paying the premiums. With permanent life insurance, there’s a guaranteed payout at the end, but the trade-off is that it’s much more expensive — generally 10 times the price of term. To offset those costs, permanent life policies include a tax-deferred savings account that earns interest over time. A portion of the premium goes into the savings account, which you can use as collateral against a loan, and the interest the account earns can be used to pay your premium. If you cash out the account, though, say goodbye to your death benefits.
A spirited debate persists among experts on the pros and cons of term and permanent. The basic argument for term is that the savings component of permanent policies can be better realized by simply investing the amount you’d pay for the more expensive permanent policy somewhere else, like your 401(k). Proponents of permanent counter that term insurance has zero value once it expires, while permanent policies are at least always worth something.
There’s a trade-off for sure, but one thing is certain: Term life policies offer the most protection for the buck. And, their term covers the years when that protection is most critical. After all, you can’t expect your children to provide for themselves when they’re young, but at the end of a 20- or 30-year term, they’re more likely to be financially self-sufficient. For many people, term is the only affordable type of life insurance.
How We Found the Best Life Insurance
We only looked at term life insurance, starting with a list of 67 life insurance companies culled from the Insurance Information Institute’s “Find an Insurance Company” tool, as well as A.M. Best’s Consumer Insurance Center. From there:
We required companies to underwrite their own policies — and to offer them to individuals.
Some life insurance companies deal only in large-group insurance, like the type included with employee benefits.
Others essentially act as middlemen, selling life insurance products created and paid by others. While not inherently bad, the middlemen add complicated liability issues: If you need to file a claim, who do you work with — and how does the other party get paid? If one or the other goes out of business, what happens to your policy? Some companies can answer these questions more easily (and more transparently) than others, but to get the clearest idea of which companies offer the best life insurance policies, we only looked at providers that took on the financial responsibility for their products.
ACE Group Auto Insurance, Aflac Insurance, AIG, Ameriprise Financial, Balboa Insurance Group, Esurance, GEICO, The General Insurance, Genworth Financial, Great-West Life Assurance, GuideOne Insurance, The Hartford, HSBC, OneAmerica, Progressive, Protective Life, Quality Insurance Service, Sun Life Financial, Unum, Voya
We looked for nationwide providers with policies available to everyone.
There are plenty of regional insurance providers that can write a fantastic term life policy, but we focused on just the big guys: companies that sold policies in at least 40 states, with no special membership requirements. If you’re looking for life insurance, these will be a great place to start — and will be a reliable comparison to the quotes you might also get from smaller providers.
21st Century, American Family Insurance, Auto Owners Insurance, Country Financial, Erie Insurance, Farm Bureau, Farm Family Life, Pekin, Shelter Insurance, Thrivent Financial for Lutherans, USAA
We set a high bar for financial strength: top ratings from A.M. Best and either Standard and Poor’s, or Moody’s.
Another level of protection Every state has an insurance guaranty association that will help pay out policies if your life insurance provider goes belly up. But, most have $300,000 caps — even if you have a term life policy worth more.
When you buy life insurance, you’re purchasing a promise that your provider will pony up if and when your beneficiaries make a claim. Financial strength is the best way a company can prove that it will make good on that promise.
There are five major agencies that rate institutions on their financial durability — we used three of them. A.M. Best focuses exclusively on insurance providers, and we dropped any companies without at least an “Excellent” (A-) rating. Then, because the Insurance Information Institute recommends getting ratings from two or more agencies, we also required a high score from at least one of the two largest agencies: at minimum, “very strong” (AA-) from Standard & Poor’s or “excellent” (Aa1) from Moody’s. (As you can see, every agency has its own rating scale and an A is not an A is not an A. Here’s how the grades stack up.)
Allied Insurance, Allstate, American General, American National Property & Casualty, AXA Equitable, Cincinnati Financial, Columbian Life, EMC, Farmer’s Insurance, Federated, Fidelity Investments Insurance, Fidelity Life, Liberty Mutual, Midland National, Minnesota Life/Securian, Nationwide, Pacific Life, Principal Financial, SBLI
We required the option to convert a term policy into a permanent one — without a medical exam.
Every life insurance policy requires a brief medical exam designed to screen for the Big Three: cancer, diabetes, and cardiovascular disease. If you want to convert your policy from term to permanent, some companies require a second exam — theoretically increasing the possibility that coverage will be denied (say, for example, if you develop diabetes after purchasing your initial policy).
“Convertibility is a valuable feature because of the flexibility it affords,” explains Dr. Steven Weisbart, senior vice president and chief economist of the Insurance Information Institute. “In the event of a terminal illness, it can change a potentially worthless term policy into a permanent one where you retain the entire death benefit.”
Allianz Insurance, John Hancock, MetLife, Mutual of Omaha (United of Omaha), Ohio National, Primerica, Western & Southern Financial Group
Premium prices will increase Even without an additional medical exam, the price of your premium will always go up when you renew or convert your policy, simply because you're older. In the eyes of insurers, older means less healthy; less healthy means higher risk; and higher risk means more expensive.
And we eliminated companies whose term policies didn’t have guaranteed renewability.
The best life insurance providers will offer the option to renew the policy when yours is about to expire, but you’re not ready to give up your coverage or convert to a permanent policy. This essentially allows you to add an extra year instead. While your premium is almost certain to go up every year you exercise this option, it means you won’t be forced to give up your term insurance if you still need it — provided you pay the new, higher premiums. We looked for companies that guaranteed the option to renew on a yearly basis after the original term — again without requiring an additional medical exam.
A "guaranteed renewable" policy is very important because without it, reduced health could render you uninsurable. Nobody wants to pay a higher premium, but if you still need life insurance, expensive coverage is preferable to no coverage at all.
Guardian, Massachusetts Mutual Life, Northwestern Mutual, Prudential
Then we ranked the final six contenders on their coverage.
There are a few different riders you can add to your policy to customize it, and we scrutinized the offerings of our top contenders to see who had the best options. Some of the most important riders we looked for include:
- Guaranteed Level Premiums. This feature ensures that the premium amount won’t go up during the term, so you’ll always know what your policy will cost. All six of our finalists offered it.
- Waiver of Premium Rider. In the event you become disabled and can no longer work, this rider will forgive a policy’s premiums. “This is a relatively inexpensive and valuable feature,” says Weisbart. All six of our top contenders also offer this.
- Accelerated Death Benefit Rider. This allows for a portion of the death benefit (the amount that would be given to your beneficiaries upon your death) to be used for your medical and end-of-life care expenses. If you’re given a terminal diagnosis, this money can pay for a potentially lifesaving treatment, or ease the financial burden for things like hospice care.
- A range of conversion-eligible permanent policies. This check ensured that there aren’t limits on what policies yours can convert to, or how long you have to choose to convert. (Of course, we already cut any policies that don’t allow any term-to-permanent conversions.)
- A variety of term limits. While all six of our finalists offer a 20-year term option (currently the most popular choice on the market), only two offered a 25-year term, and New York Life lost a few points for not offering a 30-year option. (Granted, all our top picks also have the option to renew and extend their term on an annual basis, but renewing always means increasing your premiums. If you know you want a 30-year policy, you should buy it from the outset.)
We didn’t compare premium amounts.
You should absolutely shop around for the best premium prices when choosing a policy — but because life insurance is so incredibly personal, there is no way we could evaluate which is the cheapest. Carriers price their policies according to all sorts of risk factors, which differ from company to company. They all take into account things like age, physical build, medical history, heredity, driving record, and “risky” hobbies (BASE jumping, anyone?).
In order to stay competitive, every life insurance company has a certain type of risk it’ll tolerate more of. “Life insurance companies vary widely in their underwriting criteria and how they assess certain risks. Something that is a preferred risk for one company might be regarded as standard by another,” explains Steuer. The trick is matching your particular situation to the company that’s most comfortable with it – and therefore offers the lowest premium.
But what is the best cheap life insurance?
Companies don’t share their risk formulas, so the best way to find the cheapest life insurance for you is to get multiple quotes. We tried it: a $100,000 20-year term policy for a range of ages, smokers and non, from each of our top contenders. (That’s a pretty small policy, but if you’re looking to save money, one way to do it is to decrease your coverage limits.)
Our findings? While TIAA Life and Transamerica were consistently cheapest and State Farm was often on the high side, we weren’t blown away by the difference in savings: a few hundred dollars here and there. You can imagine the average person isn’t going to see major swings in price, but throw in a pre-existing condition, or a wild hobby, and that dial might spin a little more.
Amica Life Insurance
New York Life
|Profile A: Female, 25, Nonsmoker||$10||$10||$10||$11||$12|
|Profile B: Female, 30, Smoker||$22||$21||$24||$24||$27|
|Profile C: Female, 40, Nonsmoker||$13||$15||$16||$16||$20|
|Profile D: Male, 25, Nonsmoker||$11||$11||$12||$12||$13|
|Profile E: Male, 30, Smoker||$27||$25||$31||$29||$31|
|Profile F: Male, 40, Nonsmoker||$14||$17||$19||$19||$23|
TIAA Life and Transamerica beat the competition with their low monthly quotes, but we’ll say it again: Your quote is yours alone and to get the cheapest rates, you should absolutely call around. (We were unable to get quotes from Lincoln Financial Group because they require at least a $250,000 policy.) Also, many insurance companies will charge you extra fees for paying your premiums monthly versus in one annual bulk payment, so be sure to ask.
Our Picks for the Best Life Insurance
Best Overall - TIAA Life
Sure, TIAA Life has elite financial strength ratings from both A.M. Best (A++) and Standard & Poor’s (AA+), but what really set TIAA Life apart was its conversion allowance: It allows you to convert from your term insurance to any of its permanent policies at any time during your initial term, without further evidence of insurability (read: no medical exam required).
TIAA also offers term limits from 10 to 30 years in 5-year increments (the lone exception is the 25-year term — where’s that at TIAA?). This means that you could theoretically purchase a 30-year term policy when you first learn that you’re going to be a parent (say at age 30), secure a sizable benefit for your family at an affordable and stable premium for the entire term, and even if you develop a chronic illness in year 30, you’ll still be able to convert your term policy to any of TIAA’s permanent life products to preserve the benefit for your family.
It’s a farfetched scenario — and a kind of grim one — but without this allowance you might find yourself unable to purchase a policy that will provide for your family after you’re gone. This becomes even more important if you have a special-needs child who requires care into adulthood, or a “surprise” baby who won’t have yet gone to college when the initial term expires. TIAA Life covers the bases better than any of our other top contenders.
Another thing we really liked about TIAA Life was how its website broke down the complex subject of life insurance: how it works, its central purposes, and the different types. It has quote tools for both those who know what type of product they want, and those who are just starting to think about buying a policy. The Life Wizard tool in particular was one of the most helpful we saw for assessing an individual’s need for life insurance and the different options available. It was also easy to get a TIAA agent on the phone to answer specific questions and go over the ins and outs of the policies.
Most Flexible Terms - New York Life
About the only thing that kept New York Life from sharing the top spot with TIAA was its conversion privilege stipulation: It requires you to purchase a separate rider in order to convert to a permanent policy after the first 10 years of the term. Beyond that though, New York Life is on par with TIAA for financial strength, and it gives prospective buyers unparalleled options when designing their policy: any length between 10 and 20 years (there’s no longer-term, 30-year option). You could buy a 16-year policy to coincide with the exact time you expect your last child to graduate from college, or, say, an 11-year policy to match the age when your spouse’s pension kicks in.
And although New York Life requires that extra rider, it offers some nice perks for policyholders who do decide to convert sooner. For instance, if you convert in the first five years of your term, you have the choice of either being insured as if you were still the same age as when you first bought the term policy (which could end up saving you significant money), or receiving a credit equal to one year of your term policy’s premium.
Even though New York Life technically only offers term limits between 10 and 20 years, its Policy Purchase Option allows you to purchase a new replacement term policy at specific option dates without a second medical exam. In this case, although the premium will increase somewhat based on the new “original” age of the insured, coverage will extend for longer, at lower rates than if the policyholder simply renewed at the end of the first term.
New York Life also excelled when it came to educating the consumer on the complicated subject of life insurance. Its site went into impressive detail on topics that beginners should really understand, such as the philosophical argument between those who advocate term insurance and those in favor of permanent life insurance.
It might not seem like you’re ready to dive into the philosophy behind insurance policies on your first go-round — but we’re all only getting older (and therefore more expensive to insure). Now’s the time to figure it all out.
Standout Rider - Amica Life
Amica’s only main drawback was its conversion options: Unlike TIAA there’s no option to convert after the first 10 years of the policy, and unlike New York Life, there’s no rider to make up for it.
However, Amica won points for offering a thoughtful rider that we didn’t see anywhere else: the option to adjust the policy’s death benefit to keep up with inflation. “The effect of inflation on the death benefit is commonly overlooked, particularly longer-term policies — those lasting 20 or 30 years,” explains Weisbart. This is a legitimate concern: Even $500,000 won’t stretch as far in 30 years as it does today.
We were also impressed by the clarity and transparency of its website — particularly its term product breakdown. Whereas some sites made us work to locate specific policy info, Amica presented a streamlined list of what’s included and what’s optional. The Live Chat is also a helpful tool to get speedy answers to sticky questions.
We were impressed with the detail of Amica’s policy breakdown, and we love an on-call live chat option.
Other Life Insurance Providers to Consider
- Transamerica enjoys a sterling industry reputation and stacked up pretty well among our finalists, but its limited menu of conversion-eligible permanent policies means it takes a backseat to our top three. We did like its consumer-education materials though, especially the Insurance Plan Explorer, which walks through a simple series of questions to recommend an insurance type.
- Lincoln Financial also has decent coverage options and excellent financial strength, but stopped short of offering the type of flexibility and customization we found in our top three. In addition to limiting its conversion-eligible permanent policies, it also requires a minimum death benefit (called a “face amount”) of $250,000, which is more than some buyers will want.
- State Farm has the second-best financial strength out of our six finalists, but like Lincoln Financial and Transamerica, it isn’t as flexible with its conversion-eligible permanent policies and doesn’t offer an Accelerated Death Benefit rider for terminally ill policyholders. While the relative merits of this particular rider can be debated (using it automatically depletes the death benefit amount for your beneficiaries), State Farm stands out as the only provider that doesn’t offer it.
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Did You Know?
The decision to buy life insurance — and how much — depends on your dependents.
That’s right: Not everyone needs it. Life insurance is about more than simply leaving behind an inheritance for your loved ones. In fact, if leaving a gift of money for your beneficiaries to spend as they wish is your primary goal, you’re better off with a different investment vehicle, such as an IRA or a 401(k).
But let’s say you’re married with young children and a mortgage, and haven’t yet built a nest egg. Or you take care of a disabled sibling, or an aging parent who needs your financial support. These are instances where life insurance makes perfect sense: Without the money paid out by your life insurance plan, your death would cause major financial upheaval in the lives of your dependents.
But how much should you buy? The industry rule of thumb is to multiply your annual income by 10, but it’s not a very precise method for calculating something so important. A more accurate figure should take into account how much your spouse and children will need to maintain their standard of living, whether any of your children will need help with college, and your mortgage and other debt — not to mention inflation. If your employer offers life insurance, take a hard look at the coverage; even though premiums will often be low, employer-sponsored plans usually carry a relatively low death benefit, and coverage could evaporate if you change jobs.
Your health right now determines your premium for your entire term.
When you apply for life insurance, you’ll be asked a slew of questions regarding your physical health (age, height, weight, etc.) as well as your lifestyle, and medical history. You’ll also need a medical exam, typically performed by a paramedic in your home at the insurance company’s expense.
The results of the exam, along with your answers to the questions, determine the premiums for the entire term of your policy — even if it’s 30 years. If you sign up at 25, the insurance companies will use your health at age 25 to project your health at age 55.
Because “insurability” is only measured at the beginning, this means that even if you develop a serious illness a few years after purchasing the policy, the insurance company will continue to charge you based on your (healthier) medicals at the time of application. And remember: To insurance companies, younger means healthier. The later in life you start the policy, the more expensive the annual premiums will be.
Stay-at-home spouses should consider life insurance too.
In 2014, Salary.com surveyed more than 15,000 stay-at-home moms and found that their 10 most frequent responsibilities (which included day care, driving, tutoring, and cooking) amounted to an annual market value of $118,905 — the amount a household would have to pay if that work was hired out. So yeah, it absolutely does make sense for stay-at-home spouses to have their own life insurance policies.
The Bottom Line
If you have dependents that rely on your income to be happy and healthy, life insurance is likely an inevitable part of your financial future. The best life insurance will have a policy with flexible terms, great coverage, and unshakable financial stability. But don’t stop at one quote; it pays to shop around for premiums.
Best Life Insurance Policies: Summed Up
Life Insurance Policies
New York Life
Calculate how much life insurance you need. The Insurance Information Institute recommends buying enough life insurance to replace the income you generate now plus any additional expense — for example, if you do your taxes and your family will need to hire a tax preparer. It also suggests you plan to replace the “hidden income” that isn’t part of your gross wages (like matching contributions to your retirement fund) and any expenses that’ll arise at death (like funeral costs).
Get quotes and compare coverage terms. Make sure you’re doing an apples-to-apples comparison between policies. Compare identical term lengths, death benefits, premium schedules, and policy provisions. If all else is equal, choose the cheapest one!
Feeling overwhelmed? A life insurance broker can help. Insurance companies sell their products either directly, or through an agent or broker. Brokers are typically paid on commission, which gives them a shady reputation, but financial counselor Mark P. Cussen says it’s not so black-and-white: “An adviser’s experience and knowledge of your background can help you find the term life products that match your needs and budget, saving you both the headaches and uncertainty about choosing the right policy.” Going the broker route? The Society of Financial Service Professionals can help you find a responsible one.
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More Life Insurance Reviews
We’ve been looking into life insurance for years now, and have taken a closer look at some other providers too. In the coming weeks, we’ll be updating these reviews with our latest findings, so stay tuned.