Comparing Some of the Top Life Insurance Companies
When it comes down to buying term life insurance, there are a lot of options out there. Here are some of the top-rated companies and how they compare.
| Insurance Company | A.M. Best Rating* | Medical Exam** |
| American General Life Insurance Company | A | Yes |
| Banner Life Insurance Company | A+ | No** |
| Lincoln National Life Insurance Company | A+ | No** |
| Pacific Life Insurance Company | A+ | No** |
| Protective Life Insurance Company | A | No** |
| Pruco Life Insurance Company | A+ | Yes |
| Savings Bank Mutual Life Insurance Co of MA | A | No |
| United of Omaha Life Insurance Company | A- | Yes |
*A.M. Best is an agency that rates insurance companies on their ability to pay claims over the long haul. An A+ rating means this company has a "Superior" ability to pay out claims.
**All you have to do is answer a few health questions instead of setting up medical exams and blood tests. Depending on responses, you may still need a medical exam to obtain a policy.
Types of Term Life Insurance
Okay, so here’s where most people want to check out because, well . . . insurance. And I don’t blame you. I get it. But hang with me. As you look into term life insurance, you’ll definitely want to understand the different types.
Level Premium
Level term life insurance is a plan that offers a flat premium rate for the entire term (I recommend a term of 15–20 years). It’s also known as level premium because it keeps your premiums level based on the length of your term. It’s the simplest form of life insurance because once you have it, the premium and death benefit amount don’t change.
That’s a nice feeling, isn’t it? This is the main reason I recommend term life insurance level premium policies. You know exactly how much it’s going to cost every time your premium is due, and you can work it into your budget. Could insurance really be this easy? Actually, yes! Oh, and by the way, if you’re wondering, my friend Dave Ramsey also recommends level premium term life.
Term 80 (Annual Renewable)
I don’t know about you, but I just think term 80 sounds cooler. It’s a shame though because term 80 is probably not actually cooler when it comes to saving money. This type of policy is renewable every year until you turn 80, and the premium amount increases annually as you age. Exactly how much the premium increases is determined by the insurance company when they measure your risk every year at renewal time.
While the low premiums for increasing term life insurance can seem pretty sweet during the early years of the plan, the premiums will increase over time and turn out to be higher than if you’d opted for a simple level premium policy.
Decreasing
This one’s a little more complicated because, well, it makes no sense. A decreasing term policy is one where the payout decreases over time as your mortgage (or other type of loan) goes down—the payout and your loan amount drop together. The thought is that you don’t need as much of a death benefit if you’re paying down the loan—usually your mortgage—linked to the policy.
Premiums usually don’t change, so you end up paying the same every month but with the added feature of a decreasing payout. Sound like a good deal to you? Yeah, nope.
Return of Premium
This looks good on paper since it’s supposed to give you back the cost of the policy if you survive through the end of the term (and I’m definitely rooting for you).
You get your premium payments back, but premiums for this type of term life insurance are much higher in the first place. We’re talking 30–40% higher than a level premium. You could’ve invested that money and made more than the premiums cost in the first place.
Yeah, that’s a hard pass.
Guaranteed or Simplified
A guaranteed or simplified term life insurance policy is one you can get without having to mess with a medical exam. That’s right, no poking, prodding or uncomfortable encounters in a funky blue hospital gown. It may just take filling out a medical questionnaire. And some no medical exam policies have become very affordable, so keep your pants on and start typing. That’s a brand-new sentence for me.
Convertible
Hang in there because we’re almost done. A convertible term life insurance policy is one that lets you convert term life to whole life down the line. But don’t do it! Your premium will jump way up when it comes time to convert. Some people might convert if they’re coming toward the end of their policy and have a terminal illness, but that’s a rare example.
Group
Your employer might offer group term life insurance as a benefit to their employees. They might even pay the whole premium in some cases. Either way, it’s cheap. I’m always for taking the free option. But if you have to pay for your group plan, compare it closely to what you can get on your own before you chip in.
Payouts for group term life insurance are usually a lot less than a term life policy you take out on your own, so be sure to check the death benefit. And remember that if you change jobs, the insurance doesn’t go with you.
What Are the Benefits of Term Life Insurance?
Getting a term life insurance policy may be one of the smartest insurance decisions you can make. Here are some of the top benefits:
Pros and Cons of Term Life Insurance
Pros | Cons |
Is way more affordable than other insurance options like whole life or universal life insurance. | Lack of investment options (but really, this belongs over in the pros section because insurance needs to stay in its lane and not try to be an investment). |
Gives you the option to invest however you prefer (instead of locking your hard-earned dollars into a crappy, low-return investment). | You can’t cash it out (but you don’t really want to). |
Allows you to move toward becoming self-insured (more on that below). |
Protection for Your Family
Listen: If you and your spouse have young kids, term life insurance is the best way to protect them if something were to happen to you, full stop. And you’ll sleep so much better knowing those little ones will be taken care of, along with your spouse.
Best Value
When it comes to term life insurance, you get what you pay for—and in this case, that’s a good thing! All you want is insurance, not insurance with a side of crackpot investments. We’re just wanting the entrée here. Don’t let anyone upsell you on the apps and ‘zerts. So if you want to save some money—and you know I’m into that—term life insurance is your best bet. It’s some of the cheapest insurance out there and gives you the best bang for your buck, by far.
Expiration Date
Yeah, like the one on your bag of kale that you totally meant to use. Term life has a set time it expires, so you’re only paying for it for a specific amount of time. And you won’t be wasting money later in life on monthly premiums when you really don’t need the protection anymore.
Life Insurance Calculator
You can get an idea of how much you need (and save some brain calories while you’re at it) by using this quick life insurance calculator.
