Buying 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 for minimal upfront costs, at least during the years you plan to be working.
That’s part of what makes the best term life insurance policies affordable. You have them only for a set time period (or “term”), which is when you’re relatively young and healthy.
Determining what policy is going to be best for you and your family requires a brief exercise in self-discovery and a little research. Once you decide on the coverage you want, the only way to find the best deal is to request quotes from multiple insurers. With life insurance, everyone’s rates are unique (sort of like car insurance) and determined by your age, current health and a host of other variables.
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.
The Best Term Life Insurance
- Best Overall: TIAA Life
- Most Customizable: New York Life
- Honorable Mentions: Amica Life and Transamerica
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.
The Best Term Life Insurance Companies of 2020
TIAA – Best Overall
TIAA offers highly customizable policies, the ability to switch from term to whole life insurance and a variety of online tools for first-time life insurance buyers.
| J.D. Power Score | AM Best Rating | BBB Rating | SimpleScore |
|---|---|---|---|
| 4 | A++ | A- | 3.4 |
Our Two Cents – Between the high level of customization and the guaranteed renewability that comes with every policy, TIAA is the best overall term life insurance company we can find. Additionally, they offer a lot of resources to help you navigate the life insurance process with ease.
TIAA, which stands for Teachers Insurance and Annuity Association of America, 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 which life policies you can convert to, or allowing you to convert only in the first 10 years of your term. TIAA doesn’t have those restrictions, but if you convert your TIAA term life policy to a whole life policy after you turn 80 (age 65 in New York), a medical exam is required.
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 you determine whether life insurance is a smart purchase for you, and then it asks for some personal and financial data to help you estimate how much coverage you actually need and what it will cost you, approximately.
New York Life— Most Customizable
Out of all the life insurers on our list, New York Life offers the most customization options.
| J.D. Power Score | AM Best Rating | BBB Rating | SimpleScore |
|---|---|---|---|
| 4 | A++ | A+ | 4 |
Our Two Cents – With their many customization options and their plethora of online resources, New York Life is a great choice for people who are looking for options. We like that they allow you to choose any policy term between 10 and 20 years – so you can pick a policy for just 12 years or just 17 years if you want to (which other companies do not offer).
New York Life gives customers the flexibility to choose any policy term between 10 and 20 years. If you needed a policy for just 12 years, most companies would require you to go with a 15- or 20-year term. 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). 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.
New York Life also provides dozens of online articles to walk you through the process of purchasing a life insurance policy, as well as excellent customer service.
Honorable Mentions
Amica Life— Best for Flexible Budgets
With a rider that will adjust your policy’s death benefit to keep up with inflation, an Amica Life insurance policy will make sure you and your family are covered no matter what.
| J.D. Power Score | AM Best Rating | BBB Rating | SimpleScore |
|---|---|---|---|
| N/A | A+ | A+ | 3 |
Our Two Cents – Amica has strong customer service scores, their offerings are straightforward and easy to understand and their website is easy to navigate making them a great option for people who may not know much about life insurance. But they don’t offer many customization options – so what you see is what you get.
Amica’s stand-out feature is its Cost of Living Adjustment rider that will continually adjust your policy’s death benefit to keep up with inflation. (No other company on this list offers this.) However, you can’t convert your term policy to a whole life policy after 10 years.
Transamerica — Best for Strict Budgets
Transamerica is best for those who are on a budget because it allows you to purchase as little as $25,000 in coverage.
| J.D. Power Score | AM Best Rating | BBB Rating | SimpleScore |
|---|---|---|---|
| 2 | A | A- | 3.4 |
Our Two Cents – Offering both term and whole life insurance, Transamerica has a plan that will fit into your budget no matter what it is. Additionally, Transamerica will offer you life insurance even if you have a health condition – meaning it may cover you where other companies will not.
A good option for those who need only a small amount of coverage, Transamerica allows you to purchase as little as $25,000 in coverage. Most insurers require you to purchase at least a $100,000 policy. All of its policies include guaranteed renewability, but it restricts which whole life policies are available to you after purchasing a term plan.
How I Found the Best Term Life Insurance
To start, I looked only 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 looked only 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 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 among 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 start feeling 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 in slightly different ways. 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.
Who Is Term Life Insurance For?
- Best for:
- Parents: Parents should always look for ways to provide for their children even in the event of their death
- Breadwinners: Losing the main income earner would place a serious financial strain on the whole family
- Stay-at-home parents: Losing a stay-at-home parent is akin to losing $162,581 a year because of daycare costs
- Parents of special needs children: Special needs individuals need professional care their whole life
Is life insurance worth it? Yes, when you consider that term life insurance is most commonly purchased by parents as a means of providing for their dependent children in the event of their death. In most cases the main breadwinner of the home will take out a life insurance policy because 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 annual salary is $162,581. Losing a stay-at-home parent could lead to new expenses like daycare costs, which 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.
- Related: Term, Whole, and Universal Life Insurance: What’s the Difference, and What Do I Actually Need?
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, such as how much debt you have and whether you’re planning to pay for your children’s college someday.
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 right now that you’ll want to eventually continue your policy. It’s always best to 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 Lincoln Financial, limit your choice of whole life policies once you buy a term life plan.
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. However, they could also prove invaluable down the road if something were to happen to you. For example, many insurers offer disability riders, which waive 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.
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.
If I am on a budget, should I get life insurance?
Getting life insurance is even more important when you’re on a budget and you have a family.
If you’re the main income provider, imagine how difficult it would be for your spouse and children if your income was suddenly gone. With the right type of life insurance, you could still provide for your family and give them time to financially adjust to your passing.
Shop around. There’s a program out there to fit any budget. Though we always recommend whole life, if it’s out of reach, an affordable term life insurance policy can be found with just a little looking.
What are the types of terms?
How does life insurance work? To understand this, you need to understand the types of terms there are, of which there are three:
Level Premium Term— With this type of term, the premium is guaranteed to stay the same throughout the contract. This type of term life insurance is best for people looking to lock in a set rate.
Renewable Term— Rates go up year to year as you get older and must be renewed each year, as well. This type of policy is thought of as short term life insurance, and is best for anyone in between jobs and on a fixed budget.
Decreasing Term— Though the premium remains constant throughout the term life insurance coverage span, a decreasing term has the coverage amounts reduced either monthly or yearly. Decreasing term policies are good for people on a fixed budget and are looking for something more affordable.
Terms to know when buying life insurance:
- Death benefit: the reason you buy life insurance. The ‘death benefit’ is the money that is paid out to any of your named beneficiaries.
- Accelerated death benefit: Should you become terminally ill, a policy with an accelerated death benefit would allow you to receive some of your life insurance money early. Your insurer may also refer to it as a living benefit.
- Rider: a rider essentially enhances your policy but at an extra cost. An example of a rider would be a family income benefit, which allows the policyholder to set up a steady flow of income to any of his or her surviving beneficiaries for an established period of time.
- Premium: A premium is the amount of money the policyholder pays to receive coverage.
- Policy owner: the person who takes out the life insurance policy and makes payments on it. He or she then names beneficiaries to receive any money (or death benefits).
- Beneficiary: The person a policyholder chooses to receive money in the eve3nt of his or her death.
- Underwriting: When an insurance company evaluates the risk of insuring you, it is going through the underwriting phase. This may include having you go through a medical exam and accessing your personal medical records.
- Term life insurance: a type of life insurance that only lasts for a specific period of time (5, 10, 20, or 30 years).
- Permanent life insurance: Life insurance that is active your entire life. There are four types of permanent life insurance— whole life, variable life, universal life and variable universal life.
- Whole life insurance: a type of permanent life insurance that remains active for the policyholder’s entire life, provided payments are up-to-date. With whole life insurance, premiums are constant throughout the policy owner’s lifespan.
The Bottom Line
If you have children or a spouse who 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 switch to a whole life policy eventually. Do the math required to figure out how much coverage your family 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.
