12 Best Life Insurance Companies of August 2023
The best life insurance companies are financially sound, have the life insurance products you need, excel at customer service, and have affordable rates. We found that the best life insurance company overall is Nationwide, but other options might be a better fit, depending on your needs. For instance, Protective is our top choice for term coverage, and State Farm the best for customer satisfaction.
For our life insurance ratings, we evaluated dozens of life insurance carriers in the following categories, giving each category a specific weight percentage based on its importance: policy types and features (21%), financial stability (17%), application process (16%), customer satisfaction (15%), customer service (14%), riders and living benefits (9%), and life insurance rates (8%). Analyzing these key categories helps us identify which life insurance companies could be the best fit for your particular life insurance needs.
In the company information below, we mention NAIC complaint index scores. The NAIC complaint index is a tool in which the National Association of Insurance Commissioners (NAIC) shows whether a company has received more or fewer complaints than other insurers, after adjusting for market share.
12 Best Life Insurance Companies of August 2023
- Best Overall: Nationwide
- Best Term Life Insurance: Protective
- Best Buying Experience: Haven Life
- Best Convertible Term Life Insurance: MassMutual
- Best Return-of-Premium Term: Mutual of Omaha
- Great Traditional Insurer: Guardian
- Best for Military: USAA
- Great for Dividends and No-Medical Exam Life Insurance: Penn Mutual
- Cheapest Term Premiums: Banner by Legal & General
- Best for Customer Satisfaction: State Farm Life Insurance
- Best Whole Life Insurance: New York Life
- Largest Life Insurance Company: Northwestern Mutual
How to Choose the Best Life Insurance Company
To find the best life insurance companies, consider financial strength, customer complaints, customer satisfaction, available policy types, available and included riders, and ease of application. Then, collect quotes among your top picks. Doing this homework will ensure you choose a company that offers a policy that suits your needs and will be there when your family needs it.
- Financial strength: Check AM Best ratings for financial stability. A++ and A+ ratings are considered “Superior,” while A and A- are considered “Excellent.” Other agencies also rate insurance companies, including Moody’s, Fitch, Standard & Poor’s, and Demotech.
- Customer complaints: The National Association of Insurance Commissioners (NAIC) uses customer complaints to create the NAIC complaint index, which indicates whether a company received more or fewer complaints than expected, based on its market share. An index lower than 1 indicates the company received fewer complaints than expected, while a number over 1 means it got more than expected. The higher the index, the more customers complain, and vice versa.
- Customer satisfaction: Not all companies are ranked for customer satisfaction, but check sources like J.D. Power’s 2022 U.S. Individual Life Insurance and Individual Annuities studies to see if companies you’re considering are. At a glance, you can see how a company ranks compared to others when it comes to customer satisfaction.
- Available policy types: If you know which type of insurance you need, make sure each company you’re considering offers it. But note that a whole life policy with one company can be very different from a whole life policy with another. Though policies between companies might have the same name, each company tries to make its product stand out. Make sure their efforts suit your needs.
- Available and included riders: This is a major way that same-named policies can differ. For example, a universal life policy with one company might include a generous accelerated death benefit rider at no cost, while a UL policy with another company may not. Or a term policy with one company may allow you to convert it to permanent coverage, while a term policy with another company may not. Research riders to know what you’re paying for.
- Ease of application: Sometimes the biggest barrier to getting a life insurance policy is the application process. And often, it’s better to get some coverage in place—especially if you have dependents—than it is to find the absolute best coverage you can. If you’re too busy for a medical exam, look for companies that don’t require one.
If you’re healthy, choose a company that requires a medical exam or offers an accelerated underwriting process (meaning, the company will examine your medical history but won’t require an exam). This means the insurance company will take your health into consideration, which could significantly reduce your rate.
What Are the Types of Life Insurance?
Life insurance can be divided into two main types: term and permanent, or cash value life insurance. Term life insurance policies only provide coverage for a certain period of time, such as 30 years. Permanent insurance is sold primarily as either a universal or whole life policy; It’s designed to offer coverage for your entire life.
Term life insurance is often the easiest to buy: If you’re healthy and under 50, you could get a policy online in minutes. But if you need a permanent policy that will cover you for your entire life, you’re 50 or older, or are in poor health, be prepared to speak to an agent and for a longer application process (which may include a medical exam).
Term Life Insurance
Term life insurance is the most affordable type of life insurance coverage because it lasts for a limited period of time. Most term life policies cover you for between 10 and 30 years.
The best term life insurance policies offer affordable coverage that can be converted into permanent coverage before the term policy expires. This is called convertible term life insurance. The advantage of buying convertible term is that you can lock in the health classification the insurance company gave you when you first applied for the term policy. (This is important if you develop a health issue that could increase you rate, or make you ineligible for coverage.)
Most term life insurance policies also allow you to renew coverage on an annual basis once the term expires. But the premium will increase annually based on your current age; if you want coverage longer than the duration of your term policy, it’s best to convert to whole life instead of renew. Most companies offer term life insurance for terms up to 30 years, but some, such as Protective, offer terms up to 40 years.
Whole Life Insurance
Whole life insurance is more expensive than term life insurance and even universal life insurance (another form of permanent coverage). This is because whole life insurance has strong contract guarantees that ensure your coverage won’t lapse: As long as you pay premiums as scheduled in the contract, the insurance company guarantees the death benefit and cash values for life. This is why it’s an ideal solution when you need rock-solid permanent coverage and can afford the premiums. Some whole life insurance policies offered by mutual companies also pay dividends.
Universal life insurance, on the other hand, is more flexible (you can skip premium payments as needed), but could lapse in later years if you don’t build up the cash value sufficiently.
Most permanent policies have a surrender period, during which time you’ll pay a surrender charge for withdrawing from the cash value or canceling the policy. Ask how long the surrender period is on any cash value life insurance you might buy.
Universal Life Insurance
Universal life (UL) insurance is similar to whole life insurance with a couple of important distinctions. UL has flexible premiums, a flexible death benefit, and interest that is credited to the cash value based on current interest rates, which vary. So, unlike with whole life insurance, you don’t know in advance how much the cash value will be worth in the future.
Universal life insurance is more affordable than whole life insurance, but you may need to increase your premium payment in the future if the cash value doesn’t perform as expected and/or you don’t make sufficient premium payments.
Indexed Universal Life (IUL) Insurance
Indexed universal life insurance (IUL) policies are a hybrid type of UL coverage that provide an opportunity to profit from upward swings in a variety of popular stock market indexes, such as the S&P 500. Positive index performance results in the cash value being credited, while negative performance does not result in a cash value loss. The least amount the cash value will be credited is referred to as the floor (for example, when the index experiences a negative return). Most IUL policies have a 0% floor.
Conversely, gains are limited as well. In fact, insurance companies are innovative when it comes to the complexity of calculations they employ to limit gains. For example, an IUL policy may be subject to one or more (usually “more”) of the following:
- Participation rate: This is the percentage of index gains that will be credited to the policy. For example, if the index returns 10% and the participation rate is 60%, 6% would be credited).
- Spread: This rate is deducted from the index’s gains. If the index returns 10% and the spread is 4%, your policy would be credited 6%.
- Cap: This limits the amount of interest your policy can be credited. If the cap is 6% and the index returns 10%, 6% will be credited to the cash value.
IUL policies can be an attractive proposition if you want the potential for stock market gains but want to avoid losses. Just be aware that if the index doesn’t perform well enough, interest credited could be insufficient to keep up with policy expenses and your premium could increase.
Variable Life Insurance
Variable universal life insurance (VUL) is the most risky type of coverage. Like IUL, it’s typically designed on the chassis of a regular universal life insurance policy. But instead, the cash value component is invested directly in the stock market via subaccounts, which are very similar to mutual funds.
While variable life insurance can be a tax-advantaged way to invest in the stock market, the cash value is not protected from market losses. This means if your investments underperform, you could be required to increase premium payments or the policy could lapse. What’s more is that VUL policies that lapse may result in severe tax consequences.
Most people should only invest in variable life insurance if they have sufficient life insurance coverage in place via another policy. Since this is considered an investment product, it can only be sold by life insurance agents that are also licensed to sell securities. Always ask for a prospectus before investing in VUL. It’s best to speak with a financial advisor to be sure an investment in variable life insurance makes sense.
Burial Insurance (a.k.a. Final Expense and Guaranteed Issue)
Burial insurance policies are whole life policies designed for older applicants in poor health and don’t require a medical exam. Some policies have a handful of health questions, while others are considered guaranteed issue and do not consider your health at all when determining your rate or approving your application. As a result, these policies are the most expensive, relative to the amount of coverage.
They also carry a “graded benefit” for two to three years. If you die from natural causes during this time, your beneficiaries will only receive a return of the premiums you paid (usually plus a percentage like 10%). They will not receive the full death benefit unless you die after the graded period is over.
The minimum age for burial insurance may be as low as 40 years old, but some companies have higher minimum age limits. Final expense policies also have low coverage amounts (typically not more than $35,000) as they are intended to cover the insured person’s final expenses.
How Much Does Life Insurance Cost on Average?
Term life insurance can cost as little as $13 per month, on average, for a $250,000 30-year policy for a healthy 25-year-old. Or, the same policy could cost around $400 for a 65-year-old smoker. The monthly cost of whole life insurance for the same amount of coverage is over $100 per month for a healthy 25-year-old, and almost $1,000 for a 65-year-old smoker.
Life insurance companies determine how much you’ll pay through the application process, during which they consider factors such as your age, health, occupation, and location. Older applicants and those in poor health pay the most for life insurance, which is why it often makes sense to apply while you’re young and healthy.