For many people, life insurance is a necessary part of their financial plan. It can help protect your loved ones financially or pay off debt if you pass away unexpectedly. It can give you peace of mind, and it can also help you leave a financial legacy.
However, life insurance can be complicated. There are several different types of life insurance, and finding the right type for your needs is important. Term life insurance, where coverage expires after a certain number of years, is one popular type among people with young families looking to keep premiums down. Meanwhile, permanent insurance, like whole and universal life insurance policies, keep coverage in place no matter how long you live, and can even build cash value.
To help you choose the best coverage for your situation and needs, CNBC Select compared dozens of life insurance companies and ranked them based on factors like customer satisfaction as rated by JD Power’s Individual Life Insurance Study, best ratings for financial stability as rated by rating agency AM Best, online usability, and whether or not an exam is required. (See our methodology for more information on how we chose the best life insurance companies.)
Best life insurance companies
- Best overall: Northwestern Mutual
- Best for customer satisfaction: State Farm
- Best for seniors: Mutual of Omaha
- Best for term life insurance: Guardian
- Best for whole life insurance: MassMutual
- Best for universal life insurance: Pacific Life
Northwestern Mutual has been in business for over 160 years and has become the largest issuer of life insurance policies in the U.S. according to the National Association of Insurance Commissioners (NAIC). It stands out with a superior rating from AM Best, a measure of the company’s financial health and how likely it will be to meet its obligations and pay out claims.State Farm has the highest customer satisfaction ratings of any company on this list. It received an impressive score of 839 out of 1,000 in JD Power’s latest life insurance customer satisfaction ratings. For those wanting coverage without a medical exam, however, the limits are low, as State Farm only offers up to $50,000 worth of coverage for those up to age 50 or a 10-year term, whichever comes first.
Best for seniors
Mutual of Omaha’s relatively high age limits can help seniors overcome challenges in buying life insurance. Term life products are available up to age 80, while whole life products are available up to age 85. While Mutual of Omaha’s whole life policies are limited to $25,000 worth of coverage, they don’t require a medical exam.
Best for term life insurance
Guardian shines with a top-tier A++ rating from AM Best for financial strength. For those looking for term insurance, Guardian makes it easy to get an idea of how much coverage could cost for those interested in term life policies with a tool on their website. Guardian’s level term insurance offers the option of conversion to a whole life policy in the first five years for free if your needs change, a perk that generally costs extra as a rider on other policies we considered.
Best for whole life insurance
MassMutual is an ideal choice for those looking for whole life policies. It offers a wide variety of policies that can be catered to your needs. The insurer also shows strong records for dividends and estimates it will issue $1.9 billion in back to customers in 2023.
Best universal life insurance
Pacific Life’s options stand out for its various universal, indexed universal and variable universal life insurance policies. Individualized life insurance plans can help policyholders with specific concerns, like supplementing retirement income.
Do I need life insurance?
Life insurance is useful if you have expenses that won’t be able to be met if you die. In many cases, this includes things like having dependents or partner that depends on your income, or things like debt, including student loans or a mortgage. Permanent life insurance is also useful for those who want to be able to leave a financial legacy for their children or families.
How does life insurance work?
Life insurance functions differently depending on what type of coverage you choose.
Generally, you first receive your life insurance quotes and then you apply for a policy. After applying, your information is sent through underwriting, a process that determines your life insurance rates, and the amount of coverage you’re eligible for. This is also where you’ll undergo a medical exam if required. From there, your application will be approved or denied.
For term life insurance, you’ll make monthly payments for a set number of years. If you survive to the end of the term, there’s no payout. If you die before the end of the term, your loved ones receive a payout from the policy.
With whole or permanent life insurance policies, such as universal life insurance, you’ll pay into the account, and the coverage will follow you for your entire life. With whole life insurance, the premiums and death benefit are fixed from the beginning of the policy. With universal life insurance, the premium and death benefit can both change throughout the life of the policy. At the end of your life, as long as there’s value in the policy, there will be a payout to your family and loved ones.
Different policy options, called riders, can be added to personalize your coverage. Things like accelerated death benefit riders or long-term care provisions can be added to your policy to make it a better fit for your needs.
What are the different types of life insurance?
Here’s what you need to know about several common types of life insurance:
- Term insurance: This coverage generally has the cheapest premiums and offers coverage for a set number of years. After that term expires, there’s no coverage or death benefit.
- Whole life insurance: Whole life insurance policies follow you for your whole life, building a cash value. The family or organizations you choose, also called beneficiaries, will receive money when you die.
- Indexed universal life insurance: Like whole life insurance, this policy also lasts a lifetime and builds cash value, earning value based on index funds.
- Guaranteed universal life insurance: Like term policies, this type of permanent life insurance generally has a very high age as an end date where the policy will remain active, usually between ages 90 and 100. But, this policy generally doesn’t accumulate much cash value, if any.
- Variable universal life insurance: A type of life insurance where you control how the account is invested. This type of life insurance generally doesn’t have a guaranteed death benefit.
If you’re not sure which type of life insurance coverage is best for you, speaking with a financial advisor or insurance agent could help you decide.
How much life insurance should a person have?
There’s no set amount of life insurance that everyone needs. Rather,your insurance needs depend on your income amount, debt, and whether or not others depend on your income. A common rule of thumb is to have enough life insurance to cover 10 times your annual expenses.
How much does life insurance cost?
Life insurance costs vary largely based on your gender, age, health information and how much coverage you’re buying. While small, guaranteed-issue policies might have lower premiums, a large whole life policy will have much higher premiums.
For term policies, which generally have the lowest premiums, the typical life insurance premium for a $500,000 term policy is about $26 per month for a 35-year-old female, and about $30 per month for a male of the same age according to Policygenius data.
For a whole life policy, premium payments are higher. Policygenius estimates that a 35-year-old male will pay about $571 per month to pay up their premiums by age 99.
What age is best to get life insurance?
Life insurance gets more expensive with age. Therefore, it will cost the least to get it while you’re young. Buying life insurance sooner rather than later could help you save in the long run.
What is final expense insurance?
Final expense insurance is one coverage option designed to help your family and loved ones payout to cover your expenses after you die, like funeral expenses or burial expenses. These policies are generally small whole life policies and may be guaranteed issue, or a no-exam policy.
Can I use life insurance coverage while I’m still alive?
There are some life insurance policies that allow for options that could be useful while you’re alive. Some life insurance policies offer insurance riders which are add-ons to your coverage that could help cover the costs of things like long-term care or coverage to pay for terminal illnesses.
An accelerated death benefit is one of these provisions. This insurance rider could help while you’re still alive if you’re diagnosed with a chronic or terminal illness.
Additionally, some permanent coverage allows you to borrow against the cash value component built into the policy.
I have a life insurance policy through work — is that enough?
Some employers offer life insurance as a benefit. However, many people who have dependents or loved ones who need their income need more coverage than the typical workplace policy offers. Getting an individual life insurance policy can help add to the amount of insurance coverage you have.
Life insurance is an important part of financial planning. To get life insurance, you’ll want to consider your unique needs and choose the right type of insurance. From there, choose a life insurance company that’s ranked highly for customer satisfaction and financial strength to ensure that your policy will work for you.