Comparing the Top Life Insurance Companies of 2024

What is life insurance?

Life insurance serves as a cornerstone of financial security for your loved ones, offering a beacon of support in the wake of your passing. It operates on a simple premise: in return for regular premiums (which may be paid monthly, quarterly, semi-annually or annually), the life insurance company commits to providing a death benefit—a sum of money designed to ease the financial burdens that may arise. This benefit is not just a monetary gesture; it’s a shield against the immediate financial implications of loss, covering essential costs from funeral expenses to outstanding medical bills.

What sets life insurance apart is the unique advantage that the death benefit is generally paid out income tax-free and avoids the probate process. This means that your beneficiaries can access the full amount promptly and without tax deductions. They have the flexibility to use these funds however they wish — be it clearing debts, investing in educational futures or managing daily expenses.

Different types of policies, for example, term, whole or universal life insurance, offer various features and flexibility. Some policies may allow you to receive funds during your lifetime under certain conditions, like being diagnosed with a serious illness or reaching a particular age. This adds a layer of versatility to the financial protection that life insurance can provide.

What does life insurance cover?

Life insurance is designed to cover the financial risks associated with the policyholder’s death. Depending on the policy type, the death benefit can help cover funeral expenses and final medical bills and provide income replacement for the family. While most life insurance policies typically cover a wide range of causes of death, they also often include specific exclusions. Here’s a closer look at what life insurance usually covers:

• Accidental deaths: Life insurance policies cover accidental deaths, such as those resulting from car accidents or unforeseen injuries. However, accidental death and dismemberment (AD&D) policies offer additional benefits specific to certain types of accidental injuries.
• Natural causes: Natural deaths due to old age, diseases and illnesses are generally covered, provided all policy requirements are met.
• Terminal illness: If a policyholder is diagnosed with a terminal illness, some policies allow access to a portion of the death benefit while they are still alive through a living benefit or accelerated death benefit.
• Suicide: Policies typically include a suicide clause that prevents payout if death occurs within a contestability period, often one or two years. After this period, death by suicide may be covered.

What does life insurance not cover?

Certain exceptions and exclusions apply to life insurance policies, meaning that not all causes of death are covered. Here are a few examples of situations where claims may be denied:

• Criminal activities: If the policyholder dies while involved in illegal activities, such as drug trafficking or burglary, the insurer may deny the claim due to this common exclusion.
• Hazardous activities: High-risk activities like skydiving, extreme sports or other dangerous hobbies are often excluded unless disclosed and covered by additional premiums. Some insurers might offer coverage for these activities if declared upfront. However, it’s important to note that if you take up any of these activities after buying a policy, your coverage won’t be negatively impacted.
• Material misrepresentation: If the policyholder provides false or incomplete information to secure a policy (i.e., not disclosing a smoking habit or a chronic illness), the insurance company could void the policy or deny the claim if discovered, particularly during the contestability period.
• Suicide clause: If death by suicide occurs within the contestability period, generally lasting one to two years from the policy’s start, the insurance provider will typically deny the claim. However, death by suicide may be covered after this timeframe, depending on the specific insurer’s terms.

How to choose the best life insurance company

When you are ready to buy life insurance, taking a few extra steps can ensure you find the best policy based on your wants and needs. Here are some things to look for when choosing the best life insurance company for you:

• Ask for recommendations: Your friends and family may have life insurance with a company they love. You may want to ask them about their experiences with customer service at these companies.
• Review customer satisfaction ratings: You can visit the J.D. Power website or check the carrier reviews in this article to review each insurance company’s customer satisfaction ratings. J.D. Power assigns each company a score out of 1,000 possible points.
• Assess financial stability: We recommend looking at a company’s financial strength rating from a third-party agency such as AM Best, Standard & Poor’s (S&P), Fitch or Moody’s. These companies have their own rating criteria, so you may want to look at more than one company’s ratings before making a decision. A company with a low financial stability rating may have a poor history of being able to meet financial obligations and may struggle to pay life insurance death benefits to policyholders if a high volume of claims are filed simultaneously. It is important to have the assurance that your insurer has a history of strong financial stability.
• Look at customer reviews: Dozens of consumer-oriented sites such as Google, Yelp and Consumer Affairs provide reviews from insurance companies’ customers. It may be most helpful to ignore the outlier reviews and focus on the overall average instead. What did the average customer say about the company you are considering? Are the items they complained about important to you? For example, if someone complained that the company does not offer a mobile app, but a mobile app is unimportant for your needs, you may not need to consider that review in your assessment.
• Get multiple life insurance quotes: It can be beneficial to compare life insurance quotes from multiple carriers to help you find the best cheap life insurance policy. Each insurance company underwrites a bit differently so depending on your health and lifestyle factors, your rates may vary considerably from insurer to insurer. Keep in mind that prices will also vary more widely for different policy types, although additional policy features could be another cost-influencing factor.
• Seek professional counsel: While a life insurance calculator can be useful, you may be better able to determine your needs by talking with a financial advisor or a licensed life insurance agent if you have more complex needs or questions. A life insurance agent can help you decide what type of life insurance coverage is right for you and how much life insurance you need. When choosing between the many types of life insurance, it may help to get a second opinion from a professional.

How much does life insurance cost?

When determining life insurance rates, several factors can influence the premiums you pay. Understanding these variables can help you find a policy that aligns with your financial and personal needs. Here are the key elements that typically affect life insurance rates:

• Age: Younger applicants often benefit from lower rates as they pose a lower risk to insurers.
• Health: Healthier individuals usually pay less, while those with pre-existing conditions may face higher premiums.
• Policy type: Term life insurance tends to be more affordable than permanent life insurance.
• Coverage amount: Higher coverage amounts generally result in higher premiums.
• Lifestyle: Engaging in risky activities or having a hazardous occupation can increase your rates.
• Smoking status: Smokers typically pay more due to the associated health risks.
• Gender: Statistically, men often pay higher premiums than women due to shorter life expectancies.
• Family medical history: A history of serious illnesses in your family can lead to higher rates.
• Location: Insurance rates can vary based on state regulations and local cost of living.

Shopping around and reviewing different products and rates is a good strategy to find the best policy for your needs and budget. If you have a health condition, comparison shopping is especially beneficial as insurers underwrite risk factors differently, impacting the price you need to pay for coverage.

How much life insurance do I need?

The appropriate level of life insurance is different for everyone. Insurance experts recommend enough coverage to pay off any outstanding obligations the loss of your income might leave behind. Typical debts include mortgages, car loans, credit card debt, student loans, medical bills and funeral expenses. If you have young children or care for others who are financially dependent on you, consider future financial needs you may want to plan for.

For policyholders unable to afford typical life insurance, burial insurance may be a more cost-effective option. This type of policy would provide coverage for final expenses related to your funeral, such as cremation costs, a burial plot, flowers, etc. Coverage is usually available between $5,000 and $25,000 with a lower premium and fewer underwriting restrictions than standard life insurance.

Types of life insurance policies

There are many types of life insurance policies, but they all fall under two categories: term life insurance, which is only in force for a set time, and permanent life insurance, which is designed to be in effect for your entire life. Permanent life insurance comes with a cash value component. Depending on your individual needs and preferences, having one or both of these types of policies could be an integral part of your financial plan.

Term life insurance

With a term life insurance policy, you and the life insurance company enter into a contract for a specified death benefit amount for a set number of years. Unlike permanent life insurance, term life insurance doesn’t have a cash value component, and because it’s only active for a set number of years, it’s possible to outlive your policy and receive no benefits. However, you may be able to convert it into a permanent life policy at the end of your term.

Permanent life insurance

In contrast to term coverage, permanent life insurance stays in place for your entire life (although, technically, a maximum coverage age of 90 to 121 does exist, depending on the company) as long as you pay the premiums. There are many types of permanent coverage, but the two main forms are whole and universal.

Whole life insurance

Whole life insurance, a type of permanent life insurance, generally features fixed premiums and a cash value component. Although the policy terms cannot usually be changed once it is active, the cash value component could be advantageous, providing a financial cushion over time. Additionally, certain whole life policies offer the potential to earn dividends. These dividends, which are not guaranteed, may be used to enhance the cash value, pay premiums or be withdrawn as cash. However, keep in mind that the cash value typically accumulates slowly, so it’s important to assess whether this feature aligns with your long-term financial goals.

Universal life insurance

Another form of permanent life insurance, universal life insurance, is known for its flexibility. The premium and death benefit can be adjusted as needs or lifestyles change. It also has a cash value component with earned interest based on a fixed rate or how indexed accounts perform, depending on the policy.