Congratulations! You’ve made the decision to look into life insurance. Maybe you know exactly what you’re looking for or maybe you don’t think you know what you’re doing.
Jump ahead to these sections:
- What is Life Insurance?
- What Are the Different Types of Life Insurance?
- What Are the Key Features of a Life Insurance Policy?
- How Do You Know if You Need Life Insurance?
- What Are the Steps for Buying Life Insurance?
- What Are Some of the Most Popular Life Insurance Companies in the United States?
- Finding the Right Life Insurance: Frequently Asked Questions
If you feel that way, that’s okay! That’s why we’re here — to educate you and give you all the keys to understanding life insurance, the companies that offer the best fit for your family and how much you’ll pay in premiums.
Here’s how to make an educated decision when you decide to click the “purchase now” button on an insurance website. There’s a lot at stake — your family’s future.
What is Life Insurance?
Life insurance is an agreement between you and an insurance company. An insurance company will pay an agreed-upon amount of money to your beneficiaries. Your beneficiary could be any legal adult you choose — your spouse or partner, parent, sibling, or trusted friend. In exchange, you pay a monthly premium for life insurance.
Life insurance can be used to help pay for final expenses, death taxes, bills, or as an inheritance to relatives.
There are many types of life insurance policies for different types of needs.
What Are the Different Types of Life Insurance?
When it comes down to it, there are two different types of life insurance: term and permanent life insurance. While there are variations and combinations of the two, we’ll keep things simple and stick with the basics.
Term life insurance
Term life insurance is temporary life insurance for a set period of time. You can choose a term between 10 and 30 years. Let’s say you die within the policy term. The cash value of the policy is paid to the beneficiary. However, if you outlive the term of the policy, the policy ends and you don’t receive any monetary benefits.
That’s the downside to term life insurance. Let’s say you develop a health condition toward the end of the term. It would be difficult for you to purchase a new policy with a preexisting condition.
One reason term life insurance may be attractive to you is that it can reduce debt items for your loved ones, like a mortgage or car payment. As this debt gets lower over time and eventually gets paid off, the need for a large payout to cover these expenses becomes less necessary so a term policy is ideal.
Permanent life insurance
Just as its name implies, permanent life insurance is permanent. Permanent life insurance has many names but it’s in force until the policyholder dies. The face value of the policy is paid out to the beneficiary or beneficiaries. There are two primary forms of permanent life insurance:
- Whole life
- Universal life
Both allow you to save money in addition to the death benefit. Only universal life is tied to stock market performance. Within each, there are different levels of policies.
Permanent life insurance is more costly than term life insurance. It will most likely also come with a more detailed health examination. The younger and healthier you are when you purchase your policy, the less you pay for it.
Permanent life insurance could be suitable if you’re in good health and plan to use life insurance for its long-term savings benefits. It’s also suitable if you’d like to leave a legacy for your beneficiaries.
What Are the Key Features of a Life Insurance Policy?
Here are some definitions and key features of your best life insurance policy options.
Death benefit, also known as face value or cash value
Death benefit and face value refer to the amount of the policy that you sign up for that will be paid to the beneficiary upon your death.
Cash value is part of a permanent life insurance policy. As you make premium payments, a policy builds cash value. Some policies allow you to borrow part of the cash value to use while you are still alive to use for certain expenses. This offsets the death benefit when you pass away.
Policyholder, also known as named insured
The policyholder is the person named on the policy. When the policyholder dies, the insurance company will pay out.
Premium
The amount you pay per month for your policy.
Beneficiaries
The people you name to receive the payout when you pass away. In some cases, you can name more than one.
This person should be an adult. You can run into legal issues if you name minors because they can’t access the funds until they turn 18.
Riders
Riders are different stipulations that can be added to the policy. These can be payments made in addition to the death benefit.
Among these are:
- Accidental death, which pays an added amount in the case of accidental death.
- Accelerated death benefit, which pays the death benefit while you are still alive if you are diagnosed with a terminal illness.
- Waiver of premium, which can keep the policy in force without payments should you become disabled and unable to work.
Limitations or exclusions
There are always limits to what can be covered by benefits. All life insurance policies have exclusions.
Self-inflicted injury, death during the commission of a crime, and engaging in certain extracurricular activities like skydiving are common exclusions. Read each policy carefully to understand what’s not covered.
How Do You Know if You Need Life Insurance?
Many people get life insurance without really understanding why they are getting it, or worse, think they don’t need it. There are several reasons why a person needs life insurance, even a small policy. The best way to determine whether you need life insurance is to consider these “if” scenarios.
You might need life insurance if...
- You want to pay for expenses you’d be responsible for paying if you were still alive. These are the expenses that would fall in their lap if you died unexpectedly.
- You have a mortgage. The face value of your policy should equal the amount left on your mortgage and be purchased at the same time you sign for your home.
- You have dependents. Do you want to send your children to college? A life insurance policy can enable you to leave enough to pay final expenses and leave an inheritance that enables the other parent to continue on with that dream as well as helping raise the children in their absence.
- You own a small business. If you think that there are a lot of taxes on an individual upon death, there are quite a bit more for a small business owner. An insurance policy will help with expenses to either close the business or continue it.
- You have obligations. Nobody wants to think about leaving things undone. Whether it be a personal project or caring for a relative, you may need to continue that effort.
- You simply want peace of mind. There’s no written rule that you need to get life insurance but sometimes you just want the peace of mind that those you love will be taken care of financially once you’re gone.
You might not need life insurance if...
- Outstanding debt is paid off. Most policies are purchased to cover debt — that way, your loved ones aren’t forced to pay your bills. You may not need life insurance if you don’t owe any money,
- Children are self-sufficient or you have no dependents. When your children are grown or you don’t have dependents, you may not need as much life insurance as you would compared to when they depend on you.
- Enough savings to cover final expenses. If you have enough saved to pay off all your final expenses, debt, taxes, and fulfill your final wishes, you may not need life insurance.
- You are covered by another policy. Do you have life insurance coverage through another source such as the military or spouse’s job? Double-check to be sure because you may not be getting the level of coverage you may need or desire.
What Are the Steps for Buying Life Insurance?
Now that you know what life insurance is and why you need it, you’re ready to begin the process of getting your own policy. Here’s a step-by-step guide to purchasing a policy and getting the peace of mind you seek for you and your family.
Step 1: Determine your needs
This is the most important step in the process.
- Make a list of what you and your spouse owe, if you’re married. Write down what you owe yourself if you aren’t married. This could include a home, cars, credit card debt, student loan debt and any other loans you have.
- Consider your financial obligations to your kids. Discuss your plans for your kids and whether you’re planning to supplement their education.
- Do you have elderly parents or other family members in your care? What will it take to cover them?
- Determine the legacy you want to leave. How much do your family members need?
All of these factors will determine the face value of your policy.
Step 2: Ask around
One of the best places to get information about a life insurance company is from those who already have a life insurance policy. Talk with your family members and friends.
They may have firsthand experience handling the application process, customer service and may have even filed a claim.
Step 3: Get a quote from three to five carriers
Much like auto insurance, life insurance companies are not created equal. Companies weigh life factors differently. They determine how likely you are to die based on factors such as age, health, demographics, family history, and occupation.
This is called “risk.” Since each company puts a different weight on each factor, it’s a good idea to get a variety of quotes. Try to get at least three quotes.
We recommend getting a quote from Policygenius, where you can compare quotes from top insurance companies.
Compare Life Insurance Quotes On Policygenius
Step 4: Read each policy carefully
We discussed limitations and exclusions earlier, and it’s important to read this portion of your policy carefully. Other common exclusions could include a period of time where your policy is reviewed after you die before it pays out.
This is called the contestability period and could extend for a full two years. Insurance companies look for any misrepresentations, like a medical condition that should have been reported on the application.
Step 5: Purchase your policy
Once you’ve reviewed your options, select the policy that best suits your outlined needs and budget.
Now, you may be wondering which companies are the best. We’ve come up with a list of the most popular life insurance companies and some important details about each to help you through the decision-making process.
What Are Some of the Most Popular Life Insurance Companies in the United States?
There are so many options for life insurance. Check our list of the most prominent life insurance companies in the US. Most are national life insurance companies that can give you access to a local agent in your area — all you have to do is get a quote when you're ready.
Northwestern Mutual
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states
- Are online quotes available? Northwestern Mutual doesn't offer online quotes, but it does have an online calculator that will help you determine how much life insurance you will need. The system then directs you to an advisor that can help you with your policy.
- J.D. Power ranking: 810 on a scale of 1,000
Northwestern Mutual is a financial planning company with 163 years of experience under its belt. Many sites offer an online quoting system but Northwestern Mutual relies on human contact through financial advisors.
Northwestern Mutual also helps by pairing your life insurance needs with other financial plans to ensure all of your bases are covered.
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State Farm
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in 47 states (not available in NY, WI, or MA)
- Are online quotes available? Yes
- J.D. Power ranking: 808 on a scale of 1,000
State Farm is a household name. From the all-too-recognizable “Jake” commercials on television to its logo with its signature three red circles, you probably recognize State Farm as a trusted name in the insurance world. In addition to high ratings,
State Farm ranked 36 on its list of Fortune 500 corporations. State Farm began as an auto insurance company but moved into home insurance and eventually life insurance to round out its three major insurance niches.
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Mutual of Omaha
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states.
- Are online quotes available? Yes
- J.D. Power ranking: 795 on a scale of 1,000
Mutual of Omaha, which has provided insurance from the 1920s, gets high ratings from all rating agencies. In addition to life insurance, the company offers a host of financial planning products as well as Medicare supplements to help round out retirement planning for individuals.
Mutual of Omaha also partners with its own mortgage company and investment firm and handles all aspects of finances you may need for future planning.
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MassMutual
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states
- Are nine quotes available? Term life insurance quoting is available online. Permanent life insurance quoting requires speaking with an agent.
- J.D. Power Ranking: 751 on a scale of 1,000
MassMutual's extensive 160-year history offers more than longevity. It carries high ratings from the major insurance rating agencies, was named most ethical company in 2019 and received awards for corporate equality.
MassMutual also provides retirement planning products such as annuities and investment services.
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Haven Life
- Types of life insurance offered: Term life insurance
- States available: Available in all 50 states.
- Offers online quotes? Yes, the quoting process begins online.
- J.D. Power ranking: 751 on a scale of 1,000
Haven Life Insurance Company, a subsidiary of Massachusetts Mutual Life Insurance Company, was developed to reach today’s modern technical world to simplify and provide an online application process. Haven Life offers term life with instant approval to some who qualify. Others require a medical exam before acceptance.
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Ladder
- Types of life insurance offered: Term life insurance.
- States available: Life insurance products are available in all 50 states.
- Are online quotes available? Yes
Ladder is another tech-first insurance platform that offers a five-minute online application, the flexibility to adjust options as needs change over time, and in some cases, instant online approvals. They guarantee no medical exams for up to $3M in coverage, just a few health questions as part of the online application, and have a 4.8/5 customer rating on TrustPilot.
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Liberty Mutual
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states
- Are online quotes available? Yes
- J.D. Power ranking: 788 on a scale of 1,000
Liberty Mutual has become a household name and it’s strong on all fronts. It’s ranked 77 on the Fortune 500, garners ratings from the big three rating agencies, and is known for its over 100 years of service.
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Nationwide
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states.
- Are online quotes available? Yes
- J.D. Power ranking: 783 on a scale of 1,000
Nationwide offers more than one product. In addition to life insurance, it offers home, auto, and retirement services. Like the others, Nationwide is highly rated across all rating agencies and has been around since 1925.
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New York Life
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states
- Are online quotes available? No, there is no online quote available. You fill out a form online to be matched with an agent in your area
- J.D. Power ranking: 770 on a scale of 1000
Probably the oldest insurer on the list, New York Life’s been in business for 175 years. Each year, New York Life maintains a high standard of rating across all agencies.
In addition to life insurance options, New York Life offers retirement services like long-term care and annuities. Its services are also designed to assist with estate planning, small business management, and wealth-building strategies.
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Prudential
- Types of life insurance offered: Term and permanent life insurance
- States available: Available in all 50 states
- Are online quotes available? Yes
- J.D. Power ranking: 754 on a scale of 1,000
Prudential is known for its iconic rock symbol logo, fitting for a company that’s been in business for over 140 years.
It provides life insurance, annuities, and retirement planning services to its clients. Prudential is highly rated by all four rating agencies.
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Lincoln National
- Types of life insurance: Term and universal life insurance
- States available: Available in all 50 states. Universal life is available in all states but New York.
- Are online quotes available? No, there is no online quote available. You fill out a form online and are matched up with an agent in your area.
- J.D. Power ranking: 750 on a scale of 1,000
Lincoln National is the life insurance arm of Lincoln Financial Group, the fourth largest life insurance provider in the United States.
It was established in 1905 with an endorsement from President Lincoln’s son. Lincoln National is No. 188 on the Fortune 500 list and has high ratings from all four agencies. It also offers annuities and other retirement services.
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John Hancock
- Types of life insurance: Term and permanent life insurance
- States available: Life insurance products are available in all 50 states.
- Are online quotes available? No, there is no online quote available. You fill out a form online and get matched up with an agent in your area.
- J.D. Power ranking: 739 on a scale of 1,000
John Hancock has been around for over 150 years and establishes high ratings from all four rating agencies. It offers services through financial advisors that help with future planning, including investments and retirement.
John Hancock offers an array of products, from life insurance to annuities to other investment services. It also offers short-term policies such as travel insurance.
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Principal Financial
- Types of life insurance: Term and permanent life insurance
- States available: Available in all 50 states
- Are online quotes available? Yes
- J.D. Power ranking: 789 on a scale of 1000
Principal Financial offers high ratings across all four agencies and is number 201 on the Fortune 500 list of companies. Principal Financial also offers retirement planning such as annuities, 401(k) plans, and IRAs.
Over its 140 years, it has offered and continues to offer life insurance and investment vehicles such as mutual funds. These are set up through financial advisors. Principal also offers income protection insurance.
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Guardian Life
- Types of life insurance: Guardian offers both term and permanent life insurance.
- States available: Life insurance products are available in all 50 states.
- Offers online quotes? No, there is no online quote available. You fill out a form online and are matched up with an agent in your area.
- J.D. Power Ranking: 770 on a scale of 1,000
Guardian Life has been around for nearly 160 years. It’s number 238 on the Fortune 500 list and has achieved high ratings through all four agencies.
Guardian also offers dental, vision, and accident insurance as well as investment services such as annuities and IRAs.
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Finding the Right Life Insurance: Frequently Asked Questions
Still have questions? Here are the answers you may still be curious about.
How much does life insurance typically cost per month?
Life insurance cost is determined by:
- Your age
- Your health
- Where you live
- Whether or not you smoke or drink
- Your family health history
- How far you drive to work
- What type of work you do
- The type of extracurricular activities you engage in
- Whether you drive a motorcycle or not
- Whether you travel out of the country regularly
- Other factors that could shorten your lifespan
The more risk you show, the more you could pay for a life insurance policy. Some companies won’t ask a lot of questions, but keep in mind that if you have a policy that doesn’t ask questions, read the fine print. It could be loaded with exclusions and limitations.
What happens if you cancel your life insurance policy?
It depends on what type of policy you have. Let’s say you have a term life insurance policy. Your policy will simply end and you will not continue coverage.
If you have a permanent policy, you may have a cash value. The policy will cash out, tax and administration fees will be deducted and you will receive a payout for that amount.
Can a life insurance company cancel my coverage?
A life insurance company can cancel your coverage if you fail to make payments or if you misrepresent yourself on your application. For instance, let’s say you claimed to be a nonsmoker, but died of lung disease.
Who should my life insurance beneficiary be?
Most of the time, people choose their spouses if they’re married. In the absence of another parent, you may want to leave money to your kids.
However, know that if your kids are under the age of 18, the funds are put into a trust that, in most cases, cannot be touched until they turn 18.
Can seniors get a life insurance policy?
Yes. Just because you have medical conditions or are older does not mean you will be denied. It just means you will have to pay a higher premium to obtain coverage.
Get Life Insurance to Bring Peace of Mind to Your Loved Ones
Again, congratulations on taking the next step to get life insurance. Ask your spouse, adult child or a trusted friend to go through the steps with you. It helps you be accountable to yourself and those who count on you.
Sit back, relax, and never take a moment for granted. Your family members are worth it, so secure their future with a life insurance policy.