The Best Term Life Insurance Companies
Financial advisors agree: The best term life insurance providers issue robust coverage, plenty of riders, level premiums, and term-to-permanent conversion options. We sized up 71 life insurance companies based on these criteria and narrowed it down to the three with the best term life policies. The final step, finding the cheapest premium, will be up to you.
The Best Term Life Insurance Companies
- State Farm
Best Overall
- TIAA Life
Easily Convertible Policies
- New York Life
Most Flexible Terms
The best term life insurance offers a winning combination of great coverage and affordable premiums. We did a deep dive into policies for nineteen national companies and found three with outstanding term life options. As far as price goes, your premium will always depend on how “risky” it is to insure you — and every company evaluates those risk factors a little differently. To find the best price, you’ll have to compare quotes from multiple providers. Our top picks are a great place to start.
2017 marks State Farm’s fourth year running as the highest-rated life insurance provider for customer satisfaction. While that’s a strong recommendation in and of itself, we’re also impressed with State Farm’s comprehensive term life policies. The company offers term lengths ranging from five to 30 years, with the option to renew through age 95 and convert to a permanent policy through age 75. Whether you end up needing insurance for five years or fifty, State Farm has you covered. State Farm also has an industry-leading selection of policy riders, meaning its term life policies can easily be customized to fit your needs.
TIAA Life was the only company we found that topped State Farm’s generous conversion limit. With TIAA, you can convert from term life insurance to any permanent policy at any point in your initial term. TIAA is also one of the only companies that has retained “excellent” financial strength ratings since we first reviewed life insurance in 2016, giving extra security for those longer-term policies.
We’d also suggest looking into New York Life. It offers the greatest term length flexibility, allowing you to choose any number of years between 10 and 20. That’s a plus if you need insurance for a very specific time span and don’t want to pay for surplus coverage.
What is term life insurance, and why is it best for most people?
There are two major types of life insurance to consider: Term and Permanent.
- Term life insurance provides coverage for a set time frame — anywhere between 10 and 35 years. If you outlive it, the policy expires with no cash value.
- Permanent life insurance never expires, so long as you keep paying the premiums. This option guarantees a payout to your family, but the tradeoff is that it’s much more expensive — up to 10 times the price of term.
Of these two, most people will be best off buying a term life insurance policy. The main reason? Term is cheaper and simply more practical. It allows you to purchase coverage during the most critical period — say, during the 20 or so years that your kids are dependent on your salary — at a price that won’t break the bank. Think $20-30 per month, rather than $300.
John Espenschied, Agency Principal at Insurance Brokers Group, also points out that “over time, things [like a mortgage] will get paid off and savings will generally increase, reducing the need for life insurance.” In other words, after 20 years you will have built greater assets. Your family will no longer be dependent on your salary alone, so life insurance becomes less crucial.
Some people choose permanent life insurance over term for its cash value component. In short, permanent premiums are higher because part of what you pay gets invested, and grows into a savings account that you can later borrow from and earn dividends on. However, this should be a last-recourse savings option for most people. The financial advisors we spoke with generally agree that you’ll be better off paying for a less expensive term life insurance policy and investing all you can into traditional savings channels, like a mutual fund or 401(k).
[Generally] by investing money in other places such as the stock market, people will end up with a much higher return on their investment than they will with a whole life policy.
That said, if you’ve already invested heavily in typical retirement funds, permanent life insurance can be an additional avenue for passing money down to your family tax-free. Just make sure that you’re in a financially comfortable position before taking this leap. A whopping 20% of whole life insurance policies lapse in their first year due to policyholders’ inability to pay the steep premiums that come with this type of coverage. To learn more about permanent policy options and benefits, keep an eye out for our review on Whole Life Insurance.
How We Found the Best Term Life Insurance
We vetted 71 providers to find the ones with the best life insurance offerings. First, we made sure that they provide coverage in at least 40 states with no special eligibility requirements for customers — they need to be available to be the best. We also verified that each company sells individual policies. If you purchase life insurance as part of a group plan through your employer, your options will be limited to the provider it partners with.
We also checked on financial strength. Life insurance is a promise that your provider will pay up to your beneficiaries if need be, so it’s crucial that your provider is — and will remain in the foreseeable future — solvent enough to pay out on its policies. This means having “excellent” financial strength ratings from at least two of the major independent agencies. We required an A or higher from A.M. Best, which exclusively rates insurance, as well as either an AA from Standard & Poor’s or Aa from Moody’s.
Nineteen life insurance companies met our initial criteria. They’re all reputable providers with the resources to offer great coverage. We wanted to go beyond financial viability, though, and make sure that our top picks would offer comprehensive plans that can be tailor-made to fit you and your family. For term life insurance, that means variable term lengths, easy ways to extend your coverage, and a robust selection of riders. We dug into policy parameters and coverage options from all nineteen companies to see which have the best, most customizable life insurance offerings.
We looked for companies with flexible term policies: Your coverage should last for as long as you need it.
Our favorite life insurance companies offer two important policy options: guaranteed renewability and term-to-permanent conversion without a medical exam. These give you the option to extend your coverage out as far as your family needs it without jacking up your premium too much.
A guaranteed renewable policy (a.k.a. Guaranteed Insurability Rider, Renewal Provision, or Additional Purchase Option) ensures that you can renew your coverage when it’s about to expire. This could be important in light of major, unexpected life events. For instance, if a child opts for grad school, you may choose to extend your coverage until their schooling is finished. Whatever the circumstance, you’ll want to be sure your coverage is in place until your beneficiaries would no longer be in need of it.
The best life insurance providers allow yu to renew on a yearly basis after the original term without an additional medical exam. While your premium is almost certain to go up if you renew, the increase will be moderate without an exam. Espenschied estimates that changes in health could result in you paying “hundreds more per year” if you take an exam later in life. And, without guaranteed renewability, you could be refused coverage altogether.
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.
We also required the option to convert a term policy into a permanent one — again, without a medical exam. A conversion option adds flexibility to your policy. You may, for instance, have a special needs child who requires care into adulthood. Or perhaps you come into some money later in life and have more complex estate planning needs. Scenarios like these may call for a permanent life insurance policy that never expires and provides a channel for passing an inheritance on to your family. In such cases, converting can be a smart choice. And as with renewability, the best term life policies will allow you to convert without an exam, thus ensuring that your coverage continues at a fair price.
Conversion is the right to change from term life insurance to whole or other type of permanent policy without having to go through underwriting again.
We cut any insurance providers from the running that do not offer both of these options. While you may not end up needing to renew or convert your policy, it’s important to have those safeguards in place — life is unpredictable, and your life insurance should accommodate.
We required a variety of available term lengths and riders: Life insurance should be customizable for your unique needs.
After narrowing down our list based on availability, financial strength, and term flexibility, we were left with five serious contenders for the best term life insurance company.
- Globe Life
- New York Life
- State Farm
- TIAA Life
- Transamerica
Because life insurance is so personal, it’s important to choose a provider with robust features that let you tailor your coverage to your needs. In policy terms, this means the ability to choose an appropriate term length, comprehensive coverage, and add-ons that protect against the contingencies you’re worried about. Some companies also offer certain “living benefits,” which can add value to your policy even if you never need to access its death benefit.
Guaranteed level premiums are a must.
You’ll likely put a lot of time and effort into finding the right coverage at the right price. Once you’ve got it, you shouldn’t have to deal with a company hiking up premiums year after year. We verified that all of our top picks offer Guaranteed Level Premiums: The price you pay in year one will be the same price you pay in year twenty. No gimmicks or shady advertising.
A wide-range of term lengths is ideal.
The length of your term ultimately determines how much you’ll pay for your policy — you don’t want to skimp on coverage to save, but you shouldn’t have to pay for more years than you actually require. The best companies offer a variety of term lengths, allowing you to select a comfortable amount of coverage that won’t exceed your needs.
All five of our finalists offer a 20-year term (currently the most popular on the market), but most skip straight from there to a 30-year maximum. Only Transamerica has a policy in between, with the option to choose a 25-year term. We were disappointed that New York Life maxes out at 20 years, but it does allow you the freedom to choose any number of years between 10 and 20, an option we didn’t see anywhere else. This means you could choose to pay for, say, exactly 18 years until your kids are out of the house. All of our other contenders operate in increments of five or 10 years, which sacrifices some flexibility in financial planning.
Riders can protect against unforeseen circumstances.
Life insurance add-ons (known as “riders”) can make your policy extra flexible and increase your financial security. Some protect you in the event that you’re unable to pay your premiums: the Waiver of Premium rider, for example, forgives your payments if you become permanently ill or disabled and can no longer work. Some, like the Spouse Insurance rider and the Child Term rider, allow to you extend coverage to your family members for a small fee. Yet others, like the Family Income Benefit rider, alter the disbursement of your death benefit so that it best supports your beneficiaries.
We combed through our contenders’ websites to see which ones offer the best rider selections. Out of the 16 total riders we prioritized, State Farm and New York Life offer an impressive 11 each (the most we saw from any company was 12). TIAA comes in third, with eight options, but all three companies offer a good variety: among them, guaranteed level premiums, waiver of premiums, and at least one form of medical cost assistance. We cut Globe Life here for only offering three riders (that’s not a lot of extra protection).
You may even want to tack on some “living benefits.”
Some riders can be considered “living benefits” — in other words, they may be valuable to you while you’re still alive. As financial advisor Gordon Conwell puts it, “you don’t have to die to get benefits from your life insurance policy anymore.”
The Accelerated Death Benefit rider, for example, allows a portion of your death benefit to be used for medical and end-of-life expenses. This can help alleviate your family’s financial burden and in some cases pay for a potentially life-saving treatment. Another, the Critical Illness rider, allots you a lump sum of money (out of your insurer’s pocket) if you’re diagnosed with any of a pre-set list of illnesses.
While a death benefit should always be the main objective of life insurance, it’s important to think about the ways your policy could come in handy in times of financial stress. Choosing a provider that offers “living benefit” riders is a start. Our top pick, State Farm, offers a Critical Illness rider. New York Life stands out for also carrying Accelerated Death Benefit and Long Term Care riders, which can help ease the financial burden of a long-term illness.
We didn’t compare premium amounts.
Because life insurance is so incredibly personal, there’s no way we could evaluate which is the cheapest — it falls to you to shop around for the best premium prices when choosing a policy. Carriers price their policies according to a variety 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. “Insurance companies are essentially setting odds when they sell an insurance policy.” They calculate these odds using a risk formula.
The trick is matching your situation to the company that’s most comfortable with it – and therefore has the lowest premium. Companies don't share their risk formulas, so the only way to find the best price is by getting quotes from multiple providers.
We tried it: A $100,000, 20-year term policy for a range of ages, smokers and non, from our top contenders. (That’s mid-sized policy, but if you are looking to bring down those monthly premiums even more, one way to do it is to reduce your coverage amount.)
The More Risk Factors, the Higher Your Premium
While these prices certainly aren’t prescriptive, there is one clear takeaway from our quote experiment: While some companies will cut you a better deal, the best way to save is by reducing your “risk factor” as much as possible. Within any given group, prices varied only slightly from company to company — but they doubled in every smoker/non-smoker comparison. In order to get the best price possible, take steps to minimize your risk factors prior to your initial medical exam. We discuss some tips and tricks for exam prep below.
Again, your quote is yours alone. To get the cheapest rates, call around. (And be prepared to literally call on the phone. As of our most recent update, New York Life no longer offers an online quote tool.) Also, many insurance companies will cut you a deal for paying your premium annually rather than monthly, so be sure to ask.
Our Picks for the Best Term Life Insurance
Best Overall: State Farm
You don’t have to take our word for it — State Farm has held the highest customer satisfaction rating for four years running, according to J.D. Power’s 2017 survey. We take these customer rankings into strong consideration: When it comes to a product as personal and weighty as life insurance, you want to find a provider that offers great coverage and makes the insurance process go as smoothly as possible.
State Farm also boasts some of the best financial strength ratings in the industry: A++ from A.M. Best, AA from Standard & Poor’s, and Aa1 from Moody’s. Among our top picks, it’s second only to TIAA’s perfect score. This is especially important when it comes to life insurance. Such contracts can last anywhere from five years to the rest of your life. Your provider needs to remain solvent for many years down the road, and top financial strength scores are the best way to guarantee it won’t go under.
Of course, State Farm’s financial strength and customer satisfaction are only possible as a result of great insurance offerings. This company’s success is built on comprehensive life insurance that can be tailored to just about anyone. State Farm offers a wide range of term lengths — it’s the only company we looked at that starts at just five years of coverage — with guaranteed renewal through age 95. It also allows you to convert your term policy to a permanent one through age 75, “regardless of health” (meaning no second medical exam). Terms between 10 and 30 can only be bought in increments of ten years, which does limit flexibility. However, a 20-year policy, which State Farm offers, remains the most popular option and “will do the job for 90%+ of Americans,” according to one life insurance expert.
Finally, State Farm has one of the most comprehensive rider selections of any life insurance company we considered. Spouse and child-term riders allow you to add protection for your whole family, critical illness and disability income riders offer financial support in times of need, and an accidental death rider can bolster your death benefit in light of an unforeseen tragedy — that’s just naming a few. Whatever your circumstances, your life insurance can be made to fit.
The biggest drawback to State Farm’s term life insurance is that it 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. That said, the company does offer the Critical Illness rider, which can be used to mitigate some medical costs.
Easily Convertible Policies: TIAA Life
TIAA Life has elite financial strength ratings from both A.M. Best (A++) and Standard & Poor’s (AA+), but what really sets the company apart is its conversion allowance. TIAA allows you to convert from your term insurance to any of its permanent policies at any time during your initial term. The company also lets you convert your policy without “further evidence of insurability” (read: no medical exam). If, down the road, a serious illness leaves you reconsidering how much your family needs insurance, you’ll have plenty of options for extending your coverage.
TIAA also offers a broad range of term limits: from 10 to 30 years in five-year increments (the lone exception is the 25-year term). Coupled with the company’s generous conversion policies, this means 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), and secure a sizable benefit at an affordable and stable premium. Then, 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.
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, for example, 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 these 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 both for 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 life insurance needs. With a few simple questions, it guides you from “do I even need life insurance?” to exactly what policy type and size you should consider based on your individual circumstances. 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
New York Life is nearly on par with TIAA for financial strength, and it gives prospective buyers unparalleled flexibility when designing their policy: You can choose any term length between 10 and 20 years (although there’s no longer-term, 30-year option). You could buy a 16-year policy to coincide with the exact time your last child will graduate from college, or, say, an 11-year policy to match the age when your spouse’s pension kicks in. About the only thing that kept New York Life from sharing the top spot was its conversion privilege stipulation: If you decide to convert to a permanent policy after the first 10 years of your term, you’ll need to purchase a separate rider.
And although New York Life requires that extra rider, it offers some perks for policyholders who decide to convert sooner. For instance, converting in the first five years of your term gives you the choice of either being insured as if you were the same age as when you first bought the term policy (which could save 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 does allow you to buy a new replacement term policy at several set dates (like when you hit a certain age or experience certain life events) without a second medical exam. In this case, although the premium will increase somewhat based on your current age, your coverage will extend for longer, at lower rates, than if you waited to renew until the very end of your term.
New York Life also excels at consumer education. Its site has impressively easy-to-read explanations of tricky subjects, like the investment theories backing term insurance versus those in favor of permanent life insurance. It might not seem worthwhile to dive into the philosophy behind insurance policies on your first go-around — but we’re all only getting older (and therefore more expensive to insure). Now’s the time to figure it all out.
Other Term 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 (just one term policy, their “Trendsetter Super,” can be converted.) 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. If conversion isn’t your number one concern, we recommend checking out a policy with Transamerica. And if you’re only considering our top picks, we still highly recommend Transamerica’s learning materials. Its site is great as an educational resource for first-time life insurance buyers.
Tips for Building Your Term Life Insurance Policy
The amount of life insurance that you need depends on your dependents.
The industry rule of thumb is to multiply your annual income by 10, but that’s not a very precise method for calculating something so important. Our insurance guru, Tony Steuer, recommends following something called the economic life cycle theory of planning. This theory claims that the earnings-multiple method is insufficient for planning how your family’s finances are going to pan out over the long run. You don’t have to buy insurance to provide for a luxury future, you just want to provide for a steady continuation of your family’s quality of life.
A more accurate figure takes 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. You should also factor in “hidden income” that isn’t part of your gross wages (like matching contributions to your retirement fund) as well as any end-of-life expenses.
And life insurance isn’t necessary for everyone. If your primary goal is simply to leave a monetary gift for your beneficiaries, you’re likely better off with a different investment vehicle, such as an IRA or a 401(k).
Medical exams can help lower your premium.
When you apply for a life insurance quote, you’re asked a slew of questions regarding your physical health (age, height, weight, etc.) as well as lifestyle and medical history. When you’re ready to see if you qualify, you can sometimes opt for filling out a similar questionnaire, but more often you’ll need a medical exam. These are performed by a paramedic in your home or office at the insurance company’s expense.
Your health right now determines your premium for your entire term. If you sign up at 25, the insurance companies will use your health at age 25 to project your health at age 55. Companies don’t share their risk formulas, but most will look for similar red flags. A urine analysis can reveal diabetes risk as well as liver and kidney function. A stress test will disclose heart health. But unless you have reason to believe that these test results wouldn’t look good, know that undergoing an exam can usually secure a lower premium. And conversely, policies that don’t require an exam usually have higher premiums or a smaller benefit. “These insurers have to allow for something they would have caught on an exam,” Steuer says.
But because “insurability” is only measured at the beginning of your term, 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.
Prepare for your medical exam by cutting back on bad habits.
No matter when you undergo an exam, preparation will help ensure you’re well-representing your health.
- Detox — For the week leading up to your exam, swap out salt for leafy greens and guzzle as much water as you can hold. Reducing sodium and upping hydration can help lower both blood pressure and cholesterol levels.
- Fast — 8-12 hours before the exam. It’s a good idea to schedule your exam in the morning for this reason. Eating before having bloodwork done can give inaccurate results and perhaps even paint a bad picture of your glucose levels and liver function.
- Avoid anything that might skew your results — alcohol, caffeine, tobacco, strenuous exercise. All of the above can cause aberrations in your results or simply draw the truth in harsher strokes.
- That said, staving off cigarettes for a brief spell before your exam won’t do much good if you’re a longtime smoker. The exam doesn’t test for nicotine, which actually disappears from the body fairly swiftly. Instead, they look for cotinine, which shows up in blood, urine, and saliva and leaves traceable amounts for about ten times as long.
No prep can erase long-term bad habits, but it’s akin to riding a C average throughout the semester but then taking a good look at your notes the night before the final. It won’t bring you to the top percentile, but it may scrape you a low B.
Our Term Life Insurance Review: Summed Up
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