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How to Find the Best Term Life Insurance

Life insurance isn’t anyone’s favorite topic, but it is one of the most important financial products you’ll purchase in your life. After all, you’re not buying life insurance for yourself, but to take care of your loved ones when the day comes that you’re not around to do it yourself. 

For the vast majority of consumers, term life insurance will be the best choice – if only because you can buy a lot of it at a relatively low premium rate. We’ll get into this more later.

We’ve compiled this list of what we believe to be the best term life insurance providers currently available. This is not a list of the cheapest term life insurance companies, but rather those offering what we believe to be the best term products.

Based on our evaluation of the seven best term life insurance companies of 2020, AIG comes in at the top of the list. Not only is it one of the largest and best established insurance companies in America, but they also offer the full range of permanent life insurance products, in case you want to add one to your term policy at some point. Read on to learn more about what AIG offers.

The most important factor for getting the best insurance price is to compare prices from multiple carriers. We recommend using this tool below because it’s safe, secure, and will save you a bunch of time:

Why Choose a Term Life Insurance Policy?

If you need life insurance, and just about everyone does, term life is the way to go for most people. It offers several advantages over permanent or whole life insurance:

Low cost – It costs only about 10% of an identical amount of whole life insurance.

You can buy more of it – Because it’s less expensive, you can purchase a larger policy. For example, you can generally buy five times as much term insurance as whole life, at 50% of the cost.

It’s flexible – You can maintain a large death benefit during a time in life when your need is greatest, then reduce it when the need is less.

Long term periods – most term life insurance policies are available for up to 30 years. That will cover the greatest time of life insurance needed in your life.

Many policies are convertible or renewable – even when the initial term ends, you’re usually given an option to either convert the policy to permanent coverage, or continue the term in one year intervals.

Term life leaves you more money for investing – permanent life insurance policies promote the benefits of investing through life insurance. But truth be told, you’d be better off buying term coverage, and investing the difference in an exchange traded fund tied to the S&P 500.

The 7 Best Term Life Insurance Companies

While we’ve provided a ranking of what we believe to be the seven best term life insurance companies, we’ve also determined what we believe each is best for. Since you probably have a very specific need for life insurance, the specialization a company provides may be what’s most important to you.

Company
Best For
 


Best for online or direct purchase
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bestow cheap life insurance
Best for short-term coverage
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Best for customizable policy amounts
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mutual of omaha logo
Best for older applicants
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mass mutual
Best for convertible term policies
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Best for instant approval
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Best for applicants with health conditions
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1. AIG Review

AIG is one of the better-established insurance companies in the industry having begun operations all the way back in 1919. The company has revenues of nearly $50 billion, and has had more than $40 billion in claims and benefits paid over the last five years. The company has an A.M. Best rating of “A”, Excellent.

Why it Made the List: AIG’s Select-a-Term policy allows you to convert your term insurance to whole life either at the end of the term or at age 70. They also offer renewable term policies, so that you can renew your current policy when it ends without having to undergo medical qualification. Of course, your premiums will be higher based on your age at the time of renewal.

But what we really like about AIG is that they give you the option to apply either online or directly through an agent. In fact, you can get a quote online, then complete the process with an agent. This is an important quality since not everyone is comfortable making an important purchase like life insurance entirely online.

Maximum Policy Amount: $2 million
Policy Terms Offered: 10, 15, 20, 25 and 30 years
Medical Exam Requirement: In limited applications
Age Ranges Covered: 20 to 70
Other Policy Types Offered: Whole life, universal life, guaranteed issue whole life and accidental death

What Holds it Back: Unlike many of the companies on this list, AIG doesn’t offer no medical exam policies as a standard policy feature. But that means the company is likely to offer coverage for a wider range of health conditions than other companies are.

Learn More About AIG

Check out our full AIG Review!

2. Bestow Review

Bestow is a life insurance fintech company, operating entirely online and providing low-cost life insurance due to its streamlined business operations. Its policies are underwritten by North American Company for Life and Munich RE, both rated A+ by A.M. Best.

Why it Made the List: Bestow obtains your information from industry databases, eliminating the need for a medical exam. What’s more, they employed licensed life insurance agents to help you work through the process. Probably their most innovative product is their two-year term policy. It’s a short-term policy designed to provide coverage on a temporary basis, such as for those who are between jobs or changing careers.

Maximum Policy Amount: $1 million
Policy Terms Offered: 2, 10 and 20 years
Medical Exam Requirement: No
Age Ranges Covered: 21 to 45 for 20-year policies; 21 to 54 for 2- and 10-year policies
Other Policy Types Offered: Term life only

What Holds it Back: Bestow provides policies for consumers who are in excellent health. If you have a major health condition, you need to make an application elsewhere.

Learn More About Bestow

Check out our full Bestow Review!

3. Ladder Life Review

Another life insurance fintech provider, Ladder Life also enables you to apply online, where you can also complete the entire process. The company specializes in providing customizable life insurance policy amounts.

Why it Made the List: Ladder uses a unique life insurance system in which you can take a policy and change the death benefit after the fact. For example, you can take a policy for $200,000, then later increase it to $300,000. This is referred to as “laddering up”. But it also allows you to “ladder down”, by lowering your policy amount later on. The idea is to take a policy now, then have the option to increase your coverage as your financial situation improves. But later, as your need for life insurance declines, you can reduce your coverage.

Maximum Policy Amount: $8 million
Policy Terms Offered: 10, 15, 20, 25 and 30 years
Medical Exam Requirement: Depends on health condition
Age Ranges Covered: 20 to 60
Other Policy Types Offered: Term life only

What Holds it Back: Though many applicants are not required to take a medical exam – typically those in excellent health – you may be required to take an exam if you have any pre-existing health conditions.

Learn More About Ladder Life

Check out our full Ladder Life Review!

4. Mutual of Omaha Review

Mutual of Omaha policies are provided by United of Omaha Life Insurance Company. Mutual of Omaha has an A.M. Best financial strength rating of “A+”, Excellent, making it one of the strongest insurance companies in the industry.

Why it Made the List: Mutual of Omaha is one of the best-known and most trusted names in life insurance. They offer all types of life insurance, and they extend term policies all the way up to age 80. But you can also extend your term past age 80, in one year increments up to age 94.

The general minimum policy is $100,000, but you can get coverage on policies as low as $25,000 if you’re looking for a small policy. What’s more, Mutual of Omaha term life insurance policies frequently come with a conversion to whole life feature.

Maximum Policy Amount: $65 million
Policy Terms Offered: 10, 15, 20, 25 and 30 years
Medical Exam Requirement: Not required on most policies
Age Ranges Covered: 18 to 80
Other Policy Types Offered: Whole life, universal life, children’s whole life, and accidental death

What Holds it Back: If you need a policy that’s greater than $100,000, you’ll need to contact a Mutual of Omaha insurance agent, rather than completing the process online.

Learn More About Mutual of Omaha

Check out our full Mutual of Omaha Review!

5. MassMutual Review

MassMutual is a full-service life insurance provider. In fact, it’s the full-service parent of the online life insurance provider, Haven Life (see next review). It’s one of the top companies in the industry, garnering the highest financial strength ranking from A.M. Best, at “A++” Superior. The company also offers a full range of financial services, including investments and retirement planning.

Why it Made the List: MassMutual allows conversion of their Vantage Term life insurance policies to permanent life insurance without any medical questions or exams. If you’re looking for a quick approval, they also offer their Direct Term Life Insurance that becomes effective upon application approval. However, applicants must submit to a medical exam within 90 days of approval. Depending on the results of the medical exam, your premium may be adjusted higher or lower.

Maximum Policy Amount: $10 million on Vantage Term, $2 million on Direct Term
Policy Terms Offered: 10, 15, 20, 25 and 30 years
Medical Exam Requirement: Yes
Age Ranges Covered: 18 to 64
Other Policy Types Offered: Whole life, universal life, variable life and guaranteed acceptance life

What Holds it Back: MassMutual requires medical exams on most term life insurance policies. On Direct Term, your premium may be adjusted based on the results of your medical exam. Though the policy will provide a quick approval, the premium is not entirely guaranteed upfront.

Learn More About MassMutual

Check out our full Mass Mutual Review!

6. Haven Life Review

Part of the MassMutual organization, and functioning as its online life insurance portal, Haven Life is another of the growing list of life insurance fintech providers. It works with a narrow list of customers but provides very competitive pricing within the group.

Why it Made the List: Haven Life offers its InstantTerm policy that will give you a decision on your application in a matter of minutes. And not only do they render a quick decision, but the policy is in force as soon as you sign the necessary documents and make your first premium payment. In that way, it may be possible to get a life insurance policy in as little as one day. That’s one of the most disruptive business models in the life insurance industry!

The company specifically targets applicants who are in excellent health and no more than 59 years old. If you meet those qualifications, and you’re applying for a policy amount of no more than $1 million, no medical exam will be required. If you don’t, an exam will be required, which can add 10 days or more to the process.

Maximum Policy Amount: $3 million
Policy Terms Offered: 10, 15, 20 and 30 years
Medical Exam Requirement: No on most policies
Age Ranges Covered: 18 to 64
Other Policy Types Offered: Term policies only

What Holds it Back: Like other online life insurance providers specializing in low-cost coverage, policies can be difficult to impossible to get if you are in less than excellent health.

Learn More About Haven Life

Check out our Haven Life Review!

7. Sproutt Review

Sproutt has only been in operation for a little over one year but they’re already making inroads as an online source of term life insurance for people in less-than-perfect health. The company isn’t a direct insurance provider, but rather a comparison site. You complete a single online application that will be reviewed and underwritten by some of the biggest insurance companies in the business.

Why it Made the List: What sets Sproutt apart from the competition is that they do target consumers with health conditions. And even with those conditions, no medical exam is required. What’s more, the company imposes no age limit on applicants.

They offer several types of term policies, but the most interesting is the graded death benefit policy. It offers a tiered benefit to those who are in less-than-perfect health. For example, you may receive 25% of the death benefit within the first year of the policy, 50% in the second, and 100% thereafter.

Maximum Policy Amount: $5 million
Policy Terms Offered: 10, 15, 20 and 30 years
Medical Exam Requirement: No
Age Ranges Covered: No age limit
Other Policy Types Offered: Term life only

What Holds it Back: Because Sproutt accepts applicants with health conditions, it’s likely their premiums will be higher than other companies on this list who charge very low premiums for applicants in excellent health.

Learn More About Sproutt

Term Life Insurance vs. Whole Life Insurance — What’s the Difference?

There are two primary types of life insurance: term life insurance and whole life insurance.

The primary difference between the two policy types is that term is pure life insurance. That is, it’s life insurance with no cash value accumulation and no investment provision. It’s much cheaper than whole life – typically only about 10% of the cost of an equivalent amount of whole life coverage. Whole life is much more expensive precisely because of the cash value accumulation feature.

And while whole life insurance represents permanent life insurance (your policy cannot be canceled or terminated except for nonpayment of premium), term life runs only the length of the stated term of the policy. However, in most cases you’re able to renew a term policy at the end of the term for a specific number of years, even without providing proof of insurability. But because you are older at the time of the renewal, the new premium will be higher based on your age.

But still another very significant difference between the two is fees. Because there is no cash value, term life has much lower fees. With whole life, the fees are substantial, so much so that the cash value accumulation in the first few years will be minimal. This is the time during the whole life policy cycle when a disproportionate amount of the premiums paid are going to cover insurance fees.

If you don’t want to pay a lot for life insurance, or you need to purchase a large policy without paying a big premium, term life is definitely the better of the two. It’s also the policy type most often recommended by financial advisors.

What You Need to Know About Term Life Insurance
The Industry is Moving Online, But Not for Everyone

The insurance industry, like so many others, is increasingly moving to an automated, online process. That reduces or completely removes human contact from the application. That’s a major reason why purchasing life insurance online – especially term life insurance – is typically cheaper than working with an insurance agent or directly with a life insurance company.

But you should also be aware that the process results in a much more targeted product.

For example, you’ve probably noticed that the online fintech companies are the ones most likely to offer no medical exam across-the-board. But they do that by being highly selective in their customer base. Most work specifically or exclusively with younger applicants who are in excellent health. And if you qualify on both counts, you should certainly make an application with one or more of those companies.

But if you’re over 50, have any significant health conditions, or have certain specific life insurance needs, the better choice will be a full service, human assisted life insurance provider. This is a major reason why we gave our top rating to AIG. Fast and inexpensive isn’t always the best solution for everyone.

Typically Term Life Insurance Costs Less

Also, the primary advantage of term life insurance is that it’s much less expensive than permanent life insurance policies. You should take advantage of that in every way. That means coming up with a mix of a higher death benefit at a lower premium than you can get with permanent coverage.

And while you’re at it, use the savings from your term life policy to invest. Because investment type life insurance policies charge such high fees, you can almost always do a better job yourself by investing in exchange traded funds instead. Be sure to take advantage of that benefit after you purchase your term life policy.

How We Found the Best Term Life Insurance

To determine the best term life insurance, we used the following five factors in ranking the seven companies:

Maximum Policy Amount

Not everyone needs a multimillion-dollar life insurance policy. Most consumers will be adequately covered with anywhere from $100,000 to $500,000 under the most common circumstances. But the amount of coverage an insurance company offers is a major factor in determining the desirability of the company. The ability to go over $1 million, perhaps significantly, is an important option.

This may be especially true of term life insurance, since it’s often needed in higher amounts at certain times of life than others. For example, you may find you need more than $1 million in coverage when you are raising a family and have a mortgage in your 30s and 40s. But once your mortgage is paid and your children are emancipated, your need for life insurance will decline.

Policy Terms Offered

The most common terms for term life insurance policies range between 10 and 30 years. All but one of the seven best life insurance companies we’ve recommended go to 30 years. This is super important with term life insurance, since a 30-year policy comes very close to the benefits provided by whole life insurance-

Medical Exam Requirement

This one is something of a mixed bag. If you are young and healthy, and don’t want to submit to a medical exam, you’ll have an opportunity to get low-cost life insurance with companies that specialize in that niche.

However, no medical exam is not always an advantage price-wise. Unless the company specializes in no exam policies, you’ll generally pay more than you will if you submit to an exam.

One other important limitation of no medical exam policies is that they commonly exclude applicants over a certain age or those showing evidence of significant health conditions. It’s a nice option to have, but it serves a very narrow target market.

Age Ranges Covered

Term life insurance is generally better for those who are younger and may have a need for a large amount of insurance coverage at a low premium. But it can become prohibitively expensive as you get older, particularly if you’re over 50.

Still, providing term insurance for higher ages is a definite advantage. For that reason, we considered the age range offered by each company as a significant factor in each of our reviews.

Other Policy Types Offered

Though we’re specifically evaluating the best term life insurance in this guide, we’ve also considered the availability of other types of life insurance to be beneficial. If for any reason your needs will not be best served by term insurance, the ability to purchase other types of insurance, particularly permanent coverage, can be an important benefit.

For example, even if you intend to take a term policy, several years later you may decide to add a whole life policy based on a change in your life circumstances.

Summary: Best Term Life Insurance

The table below is a summary presentation of the basic features offered by each of the best term life insurance companies:

CompanyMaximum Policy AmountPolicy Terms OfferedMedical Exam RequirementAge Ranges CoveredOther Policy Types Offered

AIG$2 million10, 15, 20, 25 and 30 yearsIn limited applications20 to 70Whole life, universal life, guaranteed issue whole life and accidental death

Bestow

$1 million2, 10 and 20 yearsNo21 to 45 for 20-year policies; 21 to 54 for 2- and 10-year policiesTerm life only

Ladder Life$8 million10, 15, 20, 25 and 30 yearsDepends on health condition20 to 60Term life only

Mutual of Omaha$65 million10, 15, 20, 25 and 30 yearsNot required on most policies18 to 80Whole life, universal life, children’s whole life, and accidental death

MassMutual$10 million on Vantage Term, $2 million on Direct Term10, 15, 20, 25 and 30 yearsYes18 to 64Whole life, universal life, variable life and guaranteed acceptance life

Haven Life$3 million10, 15, 20 and 30 yearsNo on most policies18 to 64Term life only

Sproutt
$5 million10, 15, 20 and 30 yearsNoNo age limitTerm life only

The post How to Find the Best Term Life Insurance appeared first on Good Financial Cents®.

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