Best Life Insurance Companies for 2017

The best life insurance companies typically offer unparalleled financial strength and a few key policy provisions including disability protection and end-of-life care. In order to make sure you’re getting the best life insurance, you’ll need to shop around and compare rates. Luckily, we’ve put together a handy quotes tool to help take some of the heavy lifting out of the shopping process.

Find the Best Life Insurance Plans

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Money360’s Top Picks for Best Life Insurance

  • Best Overall: TIAA Life
  • Most Customizable: New York Life
  • Honorable Mentions: Amica Life, Transamerica, Lincoln Financial, State Farm

Something else that’s important to grasp right from the get go: You should only buy life insurance if you actually need it.

I don’t need life insurance right now, but I’m going to need it soon: I don’t have any dependents and, as depressing as it is, if I were to die, everyone would be OK, financially. But, I’m looking into the future — one that’s full of kids — which means life insurance is also in the cards.

It’s no fun to contemplate the fact I could die before my kids are grown, but I want to make sure they are financially supported, no matter what. I definitely don’t (and won’t) have enough money saved to do that on my own. Even if I were a one-percenter with millions in the bank, though, life insurance would still make sense for me: It’s a way to make sure there’s some money available for them down the road.

If your death, like mine right now, wouldn’t cause a financial shake-up for someone else (your spouse and kids, business partner, special-needs sibling, etc.), then you’re better off saving your money in a 401(k), an IRA, or an index fund where it can grow faster and eventually exceed the value of a life insurance policy.

If you’re like the future-me though, and you do have someone depending on you — you need life insurance. There are two basic types of life insurance: term and permanent. I’ll discuss the specific differences between them later, but for now just know that term offers better value for the vast majority of life insurance needs (including future-mine).

How I Found the Best Life Insurance

I assembled a list of 67 nationwide life insurance companies using the Insurance Information Institute’s “” tool and A.M. Best’s . After talking to experts, reading up on the industry, and scrutinizing policy details like term life insurance rates, it turned out that only six of the 67 offered all the features I’d want in a provider.

That said, I only included companies in my search that don’t have special membership requirements. There are plenty of excellent regional insurers, as well as great membership carriers like USAA, and if you’re eligible for those, you should get quotes from them too.

Last caveat: I didn’t factor in premium amounts. Of course, cheap life insurance seems better, but it’s only actually better if you have the coverage you need. Also, even if you and I both purchased the exact same policy from the same insurer, it’s unlikely we’d pay the same premiums, since there’s so much person-specific data that goes into determining those amounts. It’s impossible to evaluate a provider on their premiums alone — you’ve got to get quotes.

How life insurance rates are determined

Mortality and interest. These are the two primary factors that are taken into consideration when determining your premium rates for life insurance. Using these factors, insurers are able to put together a basic estimate of how much money they will need to pay out for death claims each year. The expense of running the life insurance company as a whole is another factor that can impact rates.

The best life insurance companies have five things in common.

They underwrite their own policies.

It turns out that not every life insurance company actually owns the products it sells. Some, like GEICO, merely service others’ policies, making them unnecessary middlemen. I don’t like the idea of an extra layer of separation if I want to change or cancel my policy. The last thing I want is for someone I love to have to jump through extra hoops to collect my death benefit, or for there to be confusion about who is cutting the check. Direct with the company underwriting my policy should eliminate those concerns.

There’s zero doubt about their ability to pay on a claim.

This is a no-brainer, but it needs to be said: You should only buy a policy that you’re confident will be honored when it comes claims time. Financial Strength Ratings (FSRs) from independent agencies are the best indicators of which companies will still be around decades from now. The Insurance Information Institute getting ratings from two or more, and all of my top picks score high across the board. They each have at least a “Superior” (A+) rating from A.M. Best (the insurance industry’s number one rating agency), as well as a “Very Strong” (AA-) from Standard & Poor’s, or an “Excellent” (Aa1) from Moody’s. My two top picks have even higher ratings than that: TIAA and New York Life have an A++ from A.M. Best and an AA+ from S&P.

You’ll be able to renew your policy past its original term without another medical exam — guaranteed.

“Guaranteed renewability” means you can renew your term policy for additional years beyond the term limit, without being forced to take another medical exam. This provision becomes crucial if you develop a serious illness near the end of your policy’s term, since it guarantees you can maintain coverage even if no one else will insure you.

It doesn’t mean your premiums won’t go up. In fact, they will — and dramatically — for two reasons. First, you’re older, and therefore a higher risk of needing to use your life insurance. Second, the fact that you’re renewing tells your insurance company you have concerns about your health — if you didn’t, you could get a cheaper rate on a new policy with a medical exam.

If you do choose to renew your term policy, it operates on a year-to-year basis, and your premium can jump with each successive renewal. Still, for the folks who need it, guaranteed renewability is a godsend.

You can convert a term policy to a permanent one.

Even though term life insurance is the only type most of us need, there are some cases where permanent can make sense. If you start out with a term policy, but end up needing permanent coverage — to secure care for a disabled family member, say, or to offset estate tax for your heirs if you become wealthy — convertibility can be a valuable feature to have.

Similar to guaranteed renewability, the important thing here is that you can extend coverage (in this case, for the rest of your life) without having to take a new medical exam. If you’re in good health, you probably won’t ever use the option because you can qualify for a better rate on a brand-new permanent life policy. But if you’re sick, converting your existing policy could be the only way to keep your coverage in force for as long as you need it.

While all my top picks will let you convert during the first part of your term, most take the option away at some point. Among my top picks, only TIAA and New York Life allow conversion at any time during the term, another reason they lead the pack.

And, it’s easy to customize your coverage.

Since everyone’s life insurance needs are different (and can change over time), the best policies allow a high degree of flexibility in your coverage, whether standard or as a rider.

  • Cost certainty — The option for a Guaranteed Level Premium is nearly standard across term policies. The option ensures that your premium won’t rise — it’ll be the same every year of your term. Level premiums make it easy to budget, and therefore easier to keep your coverage in force since you know what you’ll owe. (That said, you do pay more in the early years compared to a policy without level premiums to offset the increasing costs of insuring you as you age.)
  • Lots of options for term lengths — Most companies offer multiple term options: 10-, 15-, 20-, 25-, and 30-year terms are common. But it’s rare to find a policy as flexible as New York Life’s; it lets you select a term that’s any number of years long from 10 to 20 years. And even though New York Life doesn’t technically offer terms longer than 20 years, the “Policy Purchase Option” allows you to start a new replacement term at specific dates without another medical exam. So, you can buy an initial term of 20 years, have a surprise baby in year 12, and replace the existing policy with a new 18-year term policy (or 19, or 20). In effect, that’d be like buying a 30-year policy, except for the fact that you’ll be older when you buy the second term, so your premiums might be higher. However, those same premiums would be based on the medical data from your first policy, which could save you significant money compared to buying a brand-new policy.
  • Few, if any, conversion restrictions — I mentioned that some companies only allow conversion during the first part of the term, so if you wind up wanting to convert in the latter half of your policy, you could be out of luck. A big reason why I like TIAA Life insurance is that in addition to allowing you to convert at any time, it also lets you convert a term policy to any of its permanent products, not just the one or two it likes best (read: the more expensive ones).
  • Disability protection — If you become disabled during your term, a Waiver of Premium Rider will forgive your premiums and keep your policy in force. While it won’t replace lost income (like disability insurance), it will at least keep your life insurance from lapsing if you can’t pay for it.
  • End-of-life care — An Accelerated Death Benefit Rider lets you draw on your policy’s death benefit to help cover end-of-life costs. It can help pay for a potentially lifesaving treatment, or ease the financial burden of hospice care, making an extremely difficult situation a little bit more manageable. Keep in mind, though, if you elect to use this option, it’ll be deducted from your death benefit.

What You Need to Know When Buying Life Insurance

There are two basic types of life insurance: term and permanent.

The fundamental difference is right there in the name: Term life insurance is only in force during a set period or “term,” while permanent life insurance is yours for your entire life. So why doesn’t everyone just get permanent? Because it’s much more expensive — 10 times more than term, on average. The higher cost makes sense, since the insurance company knows it will be paying out eventually (whereas with term, there’s a good chance you’ll outlive the policy and cost the company next to nothing). However, it also means that most people can’t afford permanent life.

For most people, term is the way to go.

Term life insurance is way simpler than permanent. You pay a (much lower) premium for a set period of protection, which typically coincides with your prime working years. You can think of it as insurance on the income you haven’t yet earned. The advantage is pretty obvious: You can guard against uncertainty by securing a large death benefit for relatively little money. And if you invest the money you save by not going with a permanent insurance policy, you can wind up with more cash at the end of your life than a permanent policy would’ve paid anyway (of course, the tricky thing is actually putting aside that difference rather than spending it).

But even if you don’t invest the balance of what you’d pay for a permanent policy, term life insurance still offers a ton of value by safeguarding your dependents when they’re most vulnerable. You can buy a 20- or 30-year term policy with the expectation that your kids will be able to provide for themselves by its end, and when you and your partner will also hopefully be reaping the rewards of prudent investing, not to mention Social Security and pensions. Sure, your term policy has no value once it expires, but that’s OK — you were paying for the protection.

But there are some cases when permanent makes sense.

Life insurance is all about covering need, and in some cases the need for it lasts your entire life. One example is for those with special-needs children who will always require care.

Permanent life insurance also makes sense if you’ve built up enough wealth that your heirs will need to pay an estate tax — in 2016, that bar was set at $5.45 million. Life insurance death benefits are not subject to income tax, so if you get a permanent policy, you’ll know that your heirs will have cash-on-hand to pay the estate tax. This may make even more sense if the majority of your wealth is in property or other non-liquid assets.

Permanent life insurance should never be purchased as an investment for the policyholder.

The value of life insurance is in the death benefit, but insurance companies realized they could sell more of it (and justify higher prices) if people believed it was a sound investment not only for their dependents, but also for themselves as well. As a result, permanent life policies come with a cash-savings feature that you can access during your lifetime. A portion of each premium you pay goes into the “cash value,” which earns interest over time based on how the company invests it. It sounds good, but the returns are generally low because insurance companies are obligated to invest mostly in safe, low-yield securities like bonds.

There are also limits on how you can use the cash value in your policy. You can apply it to future premiums or use it to purchase more death benefits, but you can never allow it to run out completely — that will cancel your policy. You can also take out a loan based on your cash value, but if you do, you’ll need to repay it with interest — even though you’re the one who funded the account in the first place!

As a rough example, imagine you buy a permanent life insurance policy with a $500,000 death benefit at age 55. If you leave the cash value untouched, after 30 years it might be worth in the neighborhood of $250,000. You could cash that out (and cancel the policy), but your investment wouldn’t have generated as much return as it would have in, say, an index fund. However, if you keep the policy active, the death benefit for your heirs might be double what you put in.

“Permanent life insurance is rarely a good investment for the policyholder. However, it can be a very good investment for their heirs.”

Independent Life Insurance Agent & Investment Advisor Representative

Your health and age at the start of the policy are the biggest factors in determining your premiums.

The formulas life insurance companies use to set premiums are incredibly sophisticated, but they’re all designed to gauge life expectancy, which means age and physical health are the primary factors. However, your physical health is only actually measured once, via that medical exam when you first apply for coverage. The insurance company then uses population data to project your average risk of dying over the course of the policy (and sets your premiums accordingly).

This means that the younger and healthier you are at the start of the policy, the lower your premiums will be. It’s also why guaranteed renewability and a guaranteed conversion option are so important, because they too rely on that initial health picture, which is most likely the healthiest you’ll be at any time during your coverage. The following table shows how age and smoking affect monthly premiums, based on a 20-year term policy with a $100,000 death benefit (I excluded Lincoln Financial because it requires a minimum death benefit of $250,000).

Premiums tend to increase as you get older and smoking can have a huge impact as well.

Even if you aren’t required to take a medical exam, you should.

At the outset of just about every life insurance policy, the company has you take a brief medical exam to see what kind of shape you’re in (it’s basically looking for cancer, diabetes, and heart disease). But if you’re young enough, you might get the option to bypass the pokes and prods and just fill out a medical questionnaire. What the company probably won’t tell you is that your choice could result in higher premiums. Without hard medical data to prove your health, you could be regarded as a riskier — and therefore more expensive — bet for the company.

“Full underwriting (with the use of a medical exam) takes more time, but it’s likely to result in significantly lower premiums.”
Tony Steuer, CLU, LA, CPFFE
Founder,
Creator, The Insurance Consumer Bill of Rights

Your driving record and credit score matter, too.

While age and health make up the lion’s share of your premium value, there are other significant risk factors that companies weigh. If you have poor credit, or a history of traffic violations, those can drive up your premiums. Likewise, if you have a job that consistently takes you to dangerous locales, or requires a lot of flying, you might be perceived as a bigger risk and have to pay more for insurance.

You and your spouse should each buy a term policy.

If you’re the primary breadwinner in your family, with a spouse who takes care of the home, you might not have considered the real cost of replacing the work he or she does. Chances are, it’s more than you think. For the past few years, has surveyed more than 15,000 stay-at-home moms. In 2016, it found that the 10 most frequent responsibilities (things like day care, driving, tutoring, and cooking) totaled up to a market value of $143,102 a year! This might be what you’d have to pay outside help in their absence — reason enough to buy a separate term policy.

When does life insurance work?

Life insurance policies take effect when the insured has passed away and the beneficiaries have filed a claim. This involves submitting a certified copy of the death certificate to the life insurance company holding the policy. It’s important to file a death claim as soon as the insured is pronounced dead in order to avoid complications in the review process.

Take Action

Think carefully about how much life insurance you really need.

Maybe you’ve heard that you should multiply your annual income by 10 to get your life insurance face value, but five seconds probably isn’t enough to spend calculating something so important.

First, consider your long-term debts. Do you have a mortgage that will require payments for the next 25 or 30 years? What about student loans, medical expenses, and credit card balances? If you have kids, are you planning to pay their college costs?

Then ask yourself how much it takes to sustain your household at your current spending habits.

It’s also worth considering buying a larger death benefit than your beneficiaries will need because life insurance benefits are paid out in a tax-free lump sum, and if invested, can reap a significant amount of interest even in the very first year. For example, a $2 million death benefit, if invested at a 5 percent annual rate of return, would earn $100,000/year if left untouched.

Take the cost of inflation into account, too. I really like Amica Life’s rider that automatically increases the death benefit to keep its purchasing power consistent with inflation.


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Don’t assume you’re covered through work.

My friend and his wife are pregnant with their first child right now, and I dutifully reminded him that he should probably buy life insurance. He said he’s covered through his employer-sponsored plan at his architecture firm, but I told him not to be so sure. Most employer plans carry a death benefit of far less than you would want your dependents to have, and they’re also not portable if you switch jobs. It’s great if you have employer-sponsored life insurance, but you should probably supplement it with a policy of your own.

Do yourself a favor and work with a broker.

Insurance brokers (people who sell insurance for multiple carriers) sometimes get a bad rap because they work on commission, and if they’re slimeballs, they can push an expensive policy that you don’t need just to get a heftier cut of the action. But most brokers aren’t slimeballs, and they can be a huge help.

Brokers not only can quickly sift through hundreds of options to find the policies that best fit your needs, but also know which companies are likelier to offer you the lowest premium. How? They’ve reviewed insurance policies every day (probably for years), so they’re familiar with the specific underwriting criteria of various companies — which ones are more generous on height and weight tables, or which ones are particularly strict about driving records.

You also won’t save money by not working with a broker. Insurance companies assume a broker fee when they set their premiums, so even if you buy your policy through a website like , your premiums will be the same as if you worked with a broker. The only difference is where that commission money goes.

Maybe you’ve heard that you should talk to a fee-only financial planner instead of a broker. While it’s true that fee-only advisers don’t receive commission from insurance companies, that doesn’t mean they don’t have some other arrangement that incentivizes them to suggest certain policies. Plus, a fee-only adviser only makes recommendations, leaving you to purchase the policy yourself (and pay the built-in commission).

Even though brokers are paid on commission, that doesn’t mean they won’t give you good advice. Just make sure they’re licensed to sell life insurance in your state, and they don’t have a disciplinary record. Both of these pieces of info are publicly available from your state’s Department of Insurance.

“Insurers are constantly adjusting their underwriting criteria to take advantage of trends or make themselves more competitive in a particular demographic. A good broker will be aware of recent changes that could save you money on your policy.”
Shannah Compton Game, CFP, MBA
Chief Millennial Money Strategist at

The Bottom Line

You might not think you need to look into life insurance companies, but you never know what life has in store. It’s often best to be prepared and this is especially true if you have dependents who rely on your income. Overall, we’ve found that term life insurance offers the most bang for your buck. Just double-check to make sure you’re getting the best term life insurance (TIAA Life insurance, for example).

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