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The Best Term Life Insurance for 2020
We compared and reviewed the best term life insurance using the SimpleScore methodology, which considers riders, customer satisfaction, support, accessibility and coverage options.
The 6 best term life insurance companies of 2020
- Best Overall: Northwestern Mutual
- Best Return of Premium: State Farm
- Best Riders: Mutual of Omaha
- Best for Older Applicants: Principal Financial
- Best Online Tools: Liberty Mutual
- Best for Military Members: USAA
The best term life insurance companies at a glance
|Brand||J.D. Power||Coverage Options||A.M. Best||Standard & Poor’s||SimpleScore|
|Mutual of Omaha||4/5||4||A+||AA-||4/5|
What is term life insurance?
Term life insurance is a type of life insurance that has a predetermined end date, typically after a set number of years or once the insured reaches a specific age. If you take out a term life insurance plan and you pass away before the end of the term, the benefit amount will be issued to the person you name in the policy, usually a dependent or family member. Younger to middle-aged adults generally take out life insurance plans to make sure the family they support will still have financial stability in the event that something happens to them.
How term life insurances works
When purchasing a term life insurance policy, you’ll first choose a term and a benefit amount depending on your age, family status and financial obligations. An insurer will issue a policy based on these two variables and your personal details; you may need to undergo a medical examination during the underwriting process. You’ll also need to name a beneficiary. Once you have a policy, you’ll pay set premiums on a monthly or annual basis for the full term. If you die before the end of the term, the beneficiary will receive a payout according to the amount of coverage you purchased.
Types of terms
There are two basic types of terms that you can choose with term life insurance. The first is a set term, most commonly between 10 and 30 years. These can generally be renewed up to a certain age as long as you wish to continue coverage, although your premiums can certainly increase upon renewal. The second type of policy extends to a certain age, often 65, regardless of how old you are upon enrollment. Both types of terms are contingent upon premiums continuing to be paid in full and on time.
Term life insurance premiums are paid on a monthly or annual basis. Insurers calculate rates primarily based on your age and health, although other factors such as your job and driving record can be taken into consideration as well. In most cases, premiums will be determined during the underwriting process and remain the same for the full policy term, although they may increase over time with some longer-term policies. Premiums will also go up at renewal in accordance with your age. Certain term life policies return your premiums to you if no benefits are paid before the end of the term; these are called return of premium (ROP) policies.
When you purchase a term life insurance policy with guaranteed renewability, your premium will be set for the initial term based on the results of the underwriting process. Once the policy term ends, the insurer will keep extending coverage to you as long as premiums are paid. While premiums can increase at the start of each new term as you get older, you won’t need to submit to another medical exam and therefore won’t be denied coverage based on your health. Term life insurance policies are usually renewable up to a specific age laid out in the initial policy documents.
Term life insurance vs. whole life insurance
The main difference between term life insurance and whole life insurance is that while term life insurance is only valid for set periods of time, whole life insurance never expires as long as premiums are paid. The majority of term life benefits are never paid as the insured party’s chance of passing away is relatively low; however, all whole life plans will eventually issue a payout to the beneficiary upon the policyholder’s death, whenever that may be. As a result, premiums are generally lower for term life than whole life insurance. The latter is most popular among younger adults while the former is a common financial planning solution for seniors.
How to choose the best term life insurance for you
- Find out how much coverage you need. Use Liberty Mutual’s life insurance calculator to get a suggested amount based on your personal information and financial situation.
- Choose a term. Policies are generally available in periods of 10 to 30 years or up to the age of 65. Factors you may want to consider include your mortgage term and the number of years you anticipate needing to support any minor children.
- Consider additional coverage. For example, you may want a policy that waives premiums during periods of hardship or advances benefits in the event of a terminal illness.
- Think about converting. Many term life insurance policies can be converted into whole life insurance, but each insurer has a different set of rules and deadlines. Before signing up for a policy, think about if and when you might want to switch coverage and make sure the deadline seems reasonable.
- Compare quotes. Each life insurance carrier weighs contributing factors differently, so you may get a better quote from one company over another.
We welcome your feedback on this article and would love to hear about your experience with the life insurance providers we recommend. Contact us at firstname.lastname@example.org with comments or questions.