Getting a term life policy is by far the most popular and affordable way to get life insurance. It can provide you and your family with a significant financial safety net should the worst happen, and with minimal upfront costs – at least during the years you plan to be working. That’s part of what makes the policies so inexpensive. You only have them for a set time period (or “term”), when you’re relatively young and healthy.
Determining what policy is going to be best for you and your family simply requires a brief exercise in self-discovery, and a little research. That’s because once you decide on the coverage you actually want, the only way to find the best deal on it is to request quotes from multiple insurers. With life insurance, everyone’s rates are unique – not entirely unlike car insurance – and completely dependent on age, current health, and a host of other unique variables.
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I researched dozens of the top life insurance providers, including the top picks from our overall Best Life Insurance review, and compared their reputations, customer service reviews, and policy offerings, until I narrowed the list down to six – a completely manageable number of great companies for anyone to get quotes from. TIAA Life scored the highest marks, followed closely by New York Life, which proved to have the most customizable plans. They each offer guaranteed renewability, which means that when your term policy ends, you can easily move over to a whole life insurance policy – so you’ll never lose coverage. The remaining four (Amica Life, Transamerica, Lincoln Financial, and State Farm) are also worth getting quotes from, since they all met The Simple Dollar’s high base-line standards.
The Simple Dollar’s Top Picks for the Best Term Life Insurance
These six companies offer term life insurance nationwide, backed by years of experience and the financial fortitude required to make good on their promises. Their policies are designed to be flexible, so you can select your initial term at the start, but then have the option to renew or convert your policy to whole life insurance down the road.
- Best Overall: TIAA Life
- Most Customizable: New York Life
- Honorable Mentions: Amica Life, Transamerica, Lincoln Financial, and State Farm
How I Found the Best Term Life Insurance
To start, I only looked at providers that underwrote their own policies. Insurance brokers don’t actually do anything besides set you up with actual underwriters, so I just cut out the middlemen altogether. I also only looked at providers that offered coverage in at least 40 states. This is because I wanted to find the most useful recommendations for the most people. Unfortunately, this meant leaving out some great regional and exclusive providers, like USAA, which is only available to members of the military and their families.
Be sure to check out your local life insurance options, along with the national ones mentioned here.
I also eliminated companies that had less than an “Excellent” A.M. Best rating. In addition, I checked ratings from Fitch, S&P, and Moody’s to make sure the verdict between all of them was consistent. Financial strength is critical when choosing a term life insurance policy, because you’re going to have it for a long time — potentially 30 years. You don’t want to spend most of your working life paying for a safety net that might not be there when you really need it.
I looked for customizable policies.
The best insurance companies have a variety of policy terms and riders to choose from, so you can customize your policy to your needs. Guaranteed renewability and the option to convert your term life plan to a whole life policy without a new medical exam were musts, too.
Customer service was essential.
I also considered each company’s customer service reputation and online education resources. Filing any insurance claim is stressful, and life insurance claims especially so. A great provider is going to make the claims process quick and straightforward, so your loved ones can get their money before they even start feeling any financial strain. Representatives should also be able to answer questions and help you determine how much coverage you actually need, without overselling you. Many companies have online resources to help customers with this as well, so I compared these tools and customer satisfaction ratings, along with available coverage, to determine each company’s final ranking.
What about premiums?
Premium costs didn’t factor into the decision, because they’re nearly impossible to predict. Insurers provide everyone with a personalized quote, weighing a multitude of perceived risks that are unique to you slightly differently. The company that offers you the best rate might be one of the more expensive options for your neighbor. That’s why it’s always best to get quotes from several providers on the coverage options you want before making a purchase.
The Best Term Life Insurance Companies of 2016
TIAA Life — Best Overall
TIAA met and exceeded all our criteria — it received the highest possible rating from Fitch and A.M. Best, includes flexible and highly customizable policies, as well as online resources to help first-time buyers navigate the process with ease. It offers 10-, 15-, 20-, and 30-year terms to residents of all 50 states. Available coverage limits range from $100,000 to $5 million.
All TIAA Life policies come with guaranteed renewability, so if you eventually decide to extend your insurance term, you can’t be turned down. It’s surprisingly easy to convert your term life policy to a whole life policy through TIAA Life, too. All the top companies listed in this review offer this, but most restrict options, either by limiting what whole life policies you can convert to, or only allowing you to convert in the first 10 years of your term. TIAA doesn’t have these restrictions, so you can switch to any of its whole life products at any time.
If you’re new to life insurance, TIAA has online help articles to explain the pros and cons of each type of policy, and will be able to answer many of the questions you may have. Its Life Wizard tool is the best place to begin. It asks you a few questions about your lifestyle to help determine if life insurance is a smart purchase for you, then it asks for some personal and financial data to help you estimate how much coverage you actually need and what it will approximately cost you. Once you complete the Wizard, you can customize the level of coverage and the term length. Then you can apply for your policy directly online or request a callback, if you’d rather speak to a representative.
New York Life — Most Customizable
New York Life gives customers the flexibility to choose any policy term between 10 and 20 years. If you only needed a policy for 12 years, most companies would require you to go with a 15- or 20-year term to get twelve years of coverage. New York Life will actually write you a policy for just the number of years you need. It doesn’t offer terms longer than 20 years, though, so if you’re looking for a 30-year policy, you’ll have to choose another company, like TIAA Life.
New York Life’s standard policies don’t enable you to convert to a whole life policy after the first 10 years of your term; however, when you make your purchase, you can add a rider that removes this stipulation (which I recommend). There are more advantages to converting in the early years of your policy, though. If you convert within five years, New York Life will give you the option of either getting a whole life policy at the same rate you would’ve gotten when you first purchased your term life policy, or else getting a credit on your account. If you decide you’d rather renew your policy instead, New York Life gives you the option to do this at several points during your term, rather than making you wait until the end.
Customers report a high degree of satisfaction with New York Life’s offerings, according to J.D. Power’s 2015 life insurance study. It received above-average ratings in all categories, including price, policy offerings and company interaction. It provides dozens of online articles to walk you through the process of purchasing a life insurance policy, as well as 24/7 customer service.
You can purchase an additional Cost of Living Adjustment rider through Amica Life that will continually adjust your policy’s death benefit to keep up with inflation. (No other company on this list offers this.) You can’t convert your term policy over to a whole life one after 10 years, however.
A good option for those who only need a small amount of coverage, Transameriac allows you to purchase anywhere between $25,000 and $100,000 in coverage. Most insurers require you to purchase at least a $100,000 policy. All of its policies include guaranteed renewability, but it restricts what whole life policies are available to you after purchasing a term plan.
You need to purchase at least a $250,000 policy through Lincoln Financial, and like Transamerica, it limits its conversion-eligible whole life policies. It met all of our customer service and financial strength criteria, however.
Unmatched in terms of customer service, State Farm earned the top spot in J.D. Power’s 2015 life insurance study. Like Transamerica and Lincoln Financial, however, it limits the selection of conversion-eligible whole life policies, too. It’s also only available in 47 states, however, so residents of Mass., N.Y., and Wisc. will have to look elsewhere.
Who is Term Life Insurance For?
Term life insurance is most commonly purchased by parents as a means of providing for their dependent children in the event of their untimely death. In most cases the main breadwinner of the home will take out a life insurance policy — after all, the loss of their income could put a serious financial strain on the family. Stay-at-home parents should seriously consider taking out life insurance, too. According to a Salary.com study, the average stay-at-home parent’s salary is $112,962 per year, based on the costs of outsourcing their work. Losing a stay-at-home parent could lead to new expenses, like daycare costs, that can be difficult for an unprepared family to absorb.
While a term policy is the most common type of life insurance, it’s not always going to be the best option for everyone. If your policy doesn’t offer guaranteed renewability and your health begins to decline at the end of your term, you could be at risk of losing your life insurance once the term ends. Converting to a whole life policy, which (as the name suggests) covers you for your entire life, ensures you’ll be protected no matter what happens. A whole life policy is also a better option if you have a special-needs child who is going to need care all of his or her life, or if you make enough money that your property will incur an estate tax after your death.
How Much Coverage Do You Need?
The first step in choosing the right term life insurance policy is to figure out how much coverage you actually need. You may have been told you can use “a simple formula,” like 10 times your annual salary, to estimate the amount. This is not effective, unfortunately. The amount of coverage you need depends on a variety of factors besides your salary, like how much debt you have, and if you’re planning on paying for your children’s college someday.
To determine how much life insurance you need, you’re going to have to do the math required to determine the actual cost your death would have to your family. Think of everything you’re planning on being able to pay for – and then needing your policy to cover it.
There are online calculators to help with this. Filling out a few questions about your family and your finances can give you a more accurate estimate of how much coverage you actually need.
Why is Guaranteed Renewability So Important?
For most people, the initial term of their life insurance policy coincides with the number of years they’ll be financially responsible for their children or spouse. But in the future, you may decide you’d like to extend your policy term or convert to a whole life policy instead. Be sure to choose a company that enables you to do this with limited hassle – even if you don’t think you’ll want to eventually continue your policy right now. It’s always best to at least have the option if you need it.
Guaranteed renewability ensures you never find yourself without life insurance, unless you plan to be.
Insurers are usually stricter about converting term policies to whole life policies. Many impose limitations on how soon into your term you must make the switch, like New York Life and Amica Life, which required you to convert within the first 10 years of your policy. Others, like State Farm, Transamerica, and Linclon Financial, limit your choice of whole life policies once you purchase a term life plan. If you believe you may want to convert your policy down the road, I highly recommend considering going with TIAA Life, which doesn’t impose any of these restrictions. Otherwise, be prepared to do some research and speak to a company representative to learn about what limitations there may be on converting to a whole life policy later on.
You should also look into what riders the life insurance company offers. These are optional coverages, and they will raise the cost of your premium. They could also prove invaluable down the road if something were to happen to you, though. For example: many insurers offer disability riders, which waives your life insurance premiums if you get into an accident that severely disables you, leaving you unable to work.
Finding the Best Rates
It’s always wise to get quotes from multiple companies before committing to a purchase. You can do this on your own, or by working with an independent agent. An agent may be able to save you time by steering you toward companies that are the best for your situation. Every insurance provider measures risk differently, and independent agents are typically familiar with the differences between insurers.
Whatever provider you choose, however, make sure you check its financial strength ratings on sites like A.M. Best or S&P. These ratings assess the company’s long-term stability and a poor rating could indicate that the company may not have the funds to pay out your claim when your family needs it.
Lastly, remember that the best policy isn’t always the one with the lowest rate. It’s usually not, actually. Like most things, you usually get what you pay for with life insurance. And assuming that your policy is what your family might need to depend on if something happens to you — it’s not something you want to skimp on. Compare several offers and choose the one that offers you the most coverage and flexibility for the best rate, but don’t compromise on the coverage you know you need to save a little money.
The Bottom Line
If you have children or a spouse that relies on you to support them, a term life policy is a wise investment. Make sure you choose an insurance provider that’s financially sound and offers the flexibility and coverage options you need, like TIAA Life or New York Life, which offer the ability to renew your term policy later on, or even switch to a whole life policy eventually. Do the math required to figure out how much coverage your family actually needs, and then get quotes from several providers to ensure you’re getting the best deal possible, while still choosing the best option for you and your family.
Find the Best Life Insurance Plans
Enter your ZIP code below to find and compare the best life insurance rates for you.