Best Life Insurance
Based on In-Depth Reviews
- 250+Hours of research
- 50+Sources used
- 25Companies vetted
- 3Features reviewed
- 10Top
Picks
- Term life policies are the best choice for nine out of 10 consumers
- Pre-existing conditions do not necessarily mean unaffordable rates
- There are simple, practical ways to reduce the cost of premiums
- In some cases, whole life policies can supplement your retirement income
How we analyzed the best Life Insurance Companies
Our Top Picks: Life Insurance Reviews
Best life insurance for smokers
A.M. Best rating: A
Smoking can drastically increase life insurance premiums, making it harder to afford quality coverage that protects your loved ones if you die. However, regardless of their habits, Haven Life's term policies are available to smokers. If you choose Haven Simple, you may not even need a medical exam — making them one of the best no-exam life insurance companies.
Through Haven Life, you can select between two types of policies: Haven Term and Haven Simple. Haven Term is the classic form of term life insurance and provides up to $3M in coverage. Policies are available in 10, 15, 20, 25, and 30-year terms. You can start the process online, and you'll need to indicate that you're a smoker on the application. Haven Life will inform you if you must undergo a medical exam to finalize your coverage.
Screenshot HavenLife.com, August 2020
Haven Simple offers term life insurance in 5, 10, 15, and 20-year terms. Like Haven Term, you'll complete your application online. However, you won't need to undergo a medical exam to obtain the coverage you need, regardless of your smoking status. That makes it an attractive option to people who want to avoid the hassle of seeing the doctor and need coverage immediately.
C.M. Life Insurance Company, a subsidiary of MassMutual, underwrites policies issued by Haven Life. MassMutual has an A++ rating for financial stability and claims payments, the top rating available within the insurance industry.
Best life insurance for kids
A.M. Best rating: A
For over 50 years, Gerber Life Insurance has specialized in life insurance for children, which means they've had lots of time to perfect their strategy. Gerber's unique approach to children's life insurance, known as the Gerber Grow-Up Plan, provides children with whole life insurance at low rates, sometimes as little as a few pennies a day.
Screenshot GerberLife.com, July 2023
What sets Gerber Life apart from other companies is its automatic double coverage. Once your child turns 18, the value of their policy will double. That means if you purchase a $100,000 policy, it will increase to $200,000 on their eighteenth birthday.
Gerber's Grow-Up plan accumulates a cash value, which your child can borrow against if they need it for an unexpected expense. Loan rates for borrowing against the policy are currently 8%.
Once your child turns 21, he or she can either continue to pay for their policy or cash it out completely. All participants of the Gerber Grow-Up plan are eligible for Gerber's adult life insurance policies, regardless of any health conditions or occupation.
Applying for a Gerber Life Insurance policy is quick and easy. You can apply online or over the phone. Most applications receive approval immediately.
Best life insurance for seniors over 60
A.M. Best rating: A++
Seniors looking for customizable life insurance coverage that extends well into their 90s will appreciate the options available through State Farm.
State Farm offers several life insurance policies for seniors over 60, including term and universal life insurance. It also provides a final expense policy for those who want to ensure their survivors have money to pay for their funeral and burial expenses. State Farm's policies include additional optional riders, like coverage for children under age 25 and a waiver of premiums if you become disabled or develop a critical illness.
Screenshot StateFarm.com, October 2019
You can apply for a State Farm 10-year term life insurance policy up to the age of 75. Twenty-year term policies are available for individuals up to the age of 65. Each term life policy provides at least $100,000 of coverage, which you can increase according to your needs. If you think you'll need extended-term life coverage, you can purchase a rider that offers additional coverage up to the age of 95.
State Farm's universal life insurance is a permanent life policy providing coverage throughout your entire lifetime. As you pay your premiums, the policy accumulates cash value you can withdraw if needed. Individuals between the ages of 55 and 85 can apply for the policy, which provides starting coverage of $25,000. Of course, you can increase your coverage if you prefer. You can also customize your policy with life insurance riders for children, level life insurance up to age 95 and life insurance with long-term care benefits.
State Farm's final expense insurance is an excellent option if you're simply looking for a policy that provides funeral and burial expenses. Final expense provides fixed $10,000 coverage up to the age of 100. Eligibility is limited to individuals between the ages of 50 and 80 or up to age 75 for New York residents.
Best life insurance for families
A.M. Best rating: A++
Among life insurance carriers for families, Northwestern Mutual stands out for its fully customizable life insurance options, financial strength, and availability in every state. Coverage available through Northwestern Mutual includes whole, universal, variable universal and term policies. Each policy offers a variety of options, making it easy to select one that aligns precisely with your family's needs.
Screenshot NorthWesternMutual.com, July 2023
Northwestern Mutual's variable universal life insurance policy offers the most flexibility. Like other types of permanent insurance, universal life insurance builds cash value. However, you can decide how you'd like Northwestern Mutual to invest your funds. If you're willing to tolerate some market risk, you could potentially grow the value of your policy significantly, which is why they're one of the best whole life insurance options.
Another feature of Northwestern Mutual's universal life insurance policy is flexibility in the coverage amount. If the size of your family grows, you can easily increase the value of your coverage without needing to buy an entirely new policy.
Northwestern Mutual's whole, universal, and variable universal plans are all eligible for dividend payouts. The company has a history of issuing annual dividends for over 150 years. Policyholders can keep their dividends, use them to pay their future premiums or reinvest them through their policy.
To purchase life insurance through Northwestern Mutual, you must speak with an advisor in your area.
Best life insurance for young adults
A.M. Best rating: A+
Most everyone can benefit from life insurance, even those who are young and healthy. Mutual of Omaha provides three different life insurance plans that young adults can choose among: term, whole and universal policies. What stands out about Mutual of Omaha is its customization options, which allow the policyholder to adjust their coverage as their needs change over their lifetime.
Mutual of Omaha's term life insurance is available in 10, 15, 20, and 30-year increments. Once you purchase a term life insurance policy, your premiums are guaranteed to stay the same. You'll also have the option to convert your term-life policy to whole or universal coverage if you decide you need to in the future.
A whole life policy through Mutual of Omaha provides protection that lasts the entire duration of your life, regardless of how long you live. Your premiums never increase, and your policy will accumulate a cash value as you make your regular premium payments. Some people use cash value growth to supplement their retirement income or to help cover the cost of higher education for their children.
Screenshot MutualofOmaha.com, October 2019
Mutual of Omaha's universal life coverage offers the most flexibility. Universal coverage lasts your lifetime and will build value as you pay your premiums. However, you can adjust the amount and frequency of your payments at any time, which can be helpful if you cannot make your regular payments or want to use your policy as an investment vehicle. You can also increase or decrease death benefits to meet the needs of future dependents.
You can start your Mutual of Omaha life insurance application online, but you'll need an agent's help to finalize it. Your life insurance agent can advise you of any additional riders available in your state.
More insight into our methodology
When we dove into the subject of life insurance, we started with a few basic premises: it was especially important for parents of younger children, term life was the best choice for almost everyone, and people with pre-existing conditions would have a hard time getting insured.
As our research progressed, however, we found that it wasn’t quite so black and white.
First, we found that there are plenty of ways people with less-than-perfect health can get affordable rates.
It also became clear that a life insurance policy is not only for parents. It can serve as an investment vehicle, a supplement to a retirement account, a safeguard for business partners, and a lifeline for individuals with disabilities or elderly parents. In fact, we concluded that if anyone relies on you for financial help, life insurance is something you should consider.
Because the market is saturated with insurers providing the same basic types of policies, we conducted exhaustive research and talked to multiple insurance experts who helped us establish the standards a company would have to meet to be included in our list.
These are additional companies that did not make our cut, but we have written about in the past:
Company Stability
Financial stability is a good indicator of the company’s ability to pay claims in the future. Insurance experts we interviewed were consistent in pointing out the importance of an insurer’s rating with A.M. Best, the worldwide credit rating agency for the industry. For our list of top insurers, we chose only those that obtained a grade of A (Excellent) or better.
Reputation
We checked records from the National Association of Insurance Commissioners (NAIC), the regulatory organization managed by insurance commissioners from all 50 states, the District of Columbia, and U.S. territories. Most states--though not all--provide the NAIC with information regarding any complaints filed against an insurer. We looked at each company’s complaint ratio with the NAIC, and chose those insurers with low complaint ratios (below the national median) relative to their size.
Then we took a look at each company’s ratings with J.D. Power & Associates, a global customer survey agency that measures customer satisfaction, product quality, and buyer behavior for a wide array of industries, including the insurance industry. We chose to focus on companies that offered high quality customer service according to that organization.
Policies & Coverage
Once we narrowed our list to focus on the companies that met these criteria, we carefully reviewed their policy offerings, determining which consumers could benefit the most from each. While most companies offer similar policies within the umbrellas of term and whole life, we found that some went above and beyond in savings opportunities, flexibility, ease of application, and willingness to work with customers with pre-existing conditions.
Helpful information about Life Insurance
What is life insurance?
Life insurance is a type of insurance policy that pays a lump sum of money to a designated beneficiary when the policyholder dies. Designated beneficiaries receive these funds –also called the death benefit– tax-free, to use for whatever they see fit, including funeral costs, college, buying a home, or just daily expenses. If the person who dies is the primary breadwinner, a large enough death benefit can often help mitigate the loss of income the death represents for the family.
There are many different types of life insurance, but the most common ones are term and permanent.
What is term life insurance?
So what is term life insurance, and how does it work? Term life insurance refers to policies that are active for a certain period of time, usually 10, 15, 20, or 30 years. If you should die within that period of time, your beneficiaries receive a tax-free payout in the amount you chose when you purchased the policy.
Should you survive the term, the policy will expire or, if it’s an option in the original contract, can be converted to a permanent policy.
This type of policy is by far the simplest and cheapest option in the market. It also allows for a great deal of customization by allowing you to choose the best term for your life situation and your death benefit. For example, you can choose terms that cover the years when your children would need your income the most or, if you’re single and dependent-free, you might choose just enough coverage to pay off any co-signed debts, a mortgage, medical care, final expenses, or a mortgage.
What is whole life insurance?
Whole life, or permanent coverage, is exactly what the name implies: a policy that, as long as you pay the premiums, will pay your beneficiaries no matter when you die. While whole life policies can be between 5 to 20 times more expensive than term life, they do provide the unique advantage of accumulating tax-deferred cash value. Additionally, with these policies, some insurers also pay dividends, making them potentially worthwhile investment vehicles.
Whole life is considered to be one of several permanent life insurance policies. Other types of permanent insurance include universal life and variable life, both of which also accrue cash value, but at interest rates that vary depending on market conditions.
Additionally, there are simplified issue and guaranteed issue policies for consumers who do not want to take a medical exam. While these do not require a medical exam, they are much more expensive than those policies that do.
FOR YOUNG PARENTS & CARETAKERS
How to get life insurance
Purchasing life insurance starts with determining how much coverage you need to protect your beneficiaries. You'll also need to decide on the type of life insurance that suits your needs, whether it's a term or whole life insurance policy.
You should research various companies that provide life insurance and examine their benefits to find which one best aligns with your objectives.
Review sites can offer an objective perspective of life insurance companies. For instance, this Everyday Life insurance review indicates the company is financially stable and has a strong reputation. Similarly, this Bestow Life insurance review notes that Bestow excels in its policy varieties.
Once you know which company you want to work with, you can usually start the application process online. However, you may need to work with a life insurance agent in your area to finalize your policy. Some policies require you to undergo a life insurance medical exam before providing coverage.
How to prepare for a life insurance medical exam
A life insurance medical exam is a pretty simple process. A qualified practitioner will measure your height, weight, and blood pressure. They'll take blood and urine samples, which they'll use to evaluate you for certain medical conditions or to determine whether you smoke.
Most medical exams occur in the comfort of your own home, so you won't need to worry about scheduling an appointment at your doctor's office.
Life insurance for young parents & caretakers
If you’re a parent, chances are that the thought of life insurance has crossed your mind more than once.
Of course, you would like to provide for your children after you’re gone, but maybe you don’t know which policy to choose, are hesitant to take the medical exam, or simply put it on the shelf as something to consider later. Or maybe, like many parents on a budget, a life insurance premium might seem like a luxury expense, not a necessity.
However, obtaining life insurance might be much simpler and more affordable than you think, and its benefits are very much worth the investment required.
To start with, there's peace of mind.
Financial hardship
More than one-third of American families say that they would find themselves in serious financial trouble within one month of a breadwinner’s passing due to the loss of income. In addition, medical bills and funeral expenses can easily add up to tens -sometimes hundreds- of thousands of dollars. Without a safety net, even families on solid financial footing can end up in a truly precarious financial position.
This instability can have lasting and profound repercussions. “There are often secondary losses with the financial hardship,” said Roberta Ward, a licensed clinical social worker who specializes in bereavement and hospice care. “It might require big things like moving, like selling a house, moving to something less expensive, or to an apartment versus the neighborhood home you had been in, it might require changing schools, it might mean a change in lifestyle. All of those kinds of changes and secondary losses can significantly impact the child’s ability to resolve their grief.”
Dealing with grief
In fact, financial hardship after a death is considered a risk factor for complicated grief, an intense state of mourning that can prevent the person from recovering after a loss. While most people - including children - are resilient and will find ways to work through grief if given the right support, she says that added stressors make things much more difficult for both children and parents.
"I’m not sure that there is a harder job than being a grieving person trying to parent grieving children."
"The children are not grieving in a vacuum, the parent has their own grief, so anything that you add to their grief experience has the potential to diminish their parenting skills.” Ward adds that “if you’re financially set, you are still going to have to deal with the pain of your loss and tending to the pain and sense of loss your children feel. But if you add to that financial stress and the possibility of moving or having to go back to work or to work more hours and being away from your children, all of that makes tending to your grief and your children’s grief more difficult.”
In other words, while it cannot cure the pain of loss, financial stability can help a family stay in their home, keep children in the same school with the teachers and friends they know, and maintain some of the normal, day-to-day routines that provide the stability a family needs to navigate grief.
Our recommendation for parents
Most parents can benefit from term life insurance, an inexpensive option that can cover the period of time until their children become financially independent. We recommend that parents of very young children choose a term of at least 20 years, as this should provide sufficient coverage if you were to die while they’re still financially dependent
Conversely, if you parent a child with disabilities or other conditions that might require financial support for their whole life, a permanent policy might be right for you.
Life insurance for high-risk people or caregivers
We consider life insurance a must if you have children, but it’s also a great idea if you have elderly parents that need your help, minor or disabled siblings, or even business partners—basically if anyone in your life would suffer serious financial consequences if you were to die. Adrenaline-seekers such as rock climbers or deep sea divers should also consider a life insurance policy, even though it may be more expensive than policies for more risk-averse consumers. People with dangerous jobs, like aircraft pilots and commercial fishermen, should definitely take out life insurance if they have families.
Finally, it’s important to remember that debt does not die with the debtor, and if you have any outstanding debt that has been co-signed by someone else -such as credit cards, student loans, or mortgages- life insurance can be a way to help, even after death.
Best choices for caregivers
We recommend term life policies for caregivers, especially for people with elderly parents. If the senior you care for suffers from any type of cognitive impairment, it’s important to talk to an attorney to set up a trust to manage the funds after you’re gone.
If you have a high-risk job or lifestyle, consider contacting an experienced independent insurance agent, who can negotiate with insurance companies on your behalf. Additionally, adventure lovers who are committed to clean eating and regular exercise should consider Health I.Q., an online agency tailored to the health conscious.
LIFE INSURANCE FOR RETIREMENT OR INVESTMENT
“I used to tell my wife: this isn’t paying a bill, this is setting money aside,” says Dave Jelinek, a former insurance agent in northern Wisconsin. He decided to get whole-life policies for his two boys. “Mostly it was a savings plan. I got a $10,000 policy when they were born, and then a $50,000 policy when they were older. But it wasn’t about the life insurance, it was mostly about the savings plan.” His children then took over the payments for their life insurance policies and have kept them active for decades. These accounts, he said, gave them the motivation to keep saving.
The whole life policy is the subject of much debate in the life insurance field, with many arguing against it as expensive and unnecessary. However, many others -like Jelinek- have found it to be a great savings and investment vehicle.
As mentioned above, though whole life policies cost much more than term life, they do accrue cash value. As you pay your premium, a portion of it is set aside, letting the policy accumulate funds in addition to a certain amount of interest or dividends paid by the insurer.
So why not invest in a 401k instead of a whole life policy? Letting money accrue tax-free and being able to withdraw or borrow against it without penalties are big pluses, says Jelinek, who also partially funded his retirement with one of these policies.
“It’s mind-boggling what you can do with good life insurance.”
"The key," Jelenik says, "is to talk with a knowledgeable agent and choose the right company." In his case, he chose a mutual company that could pay dividends.
On the other hand, many financial experts and insurance agents believe that there are much more worthwhile investment choices. As with any big money decision, make sure to talk to a financial planner before pursuing this or any other option.
Best choices for savings and retirement
If you’ve already maxed out your contributions to more traditional retirement accounts—such as a 401k and/or Individual Retirement Account (IRA)— a whole life policy can be a good complementary product. With these policies, thinking big picture and long-term is important, as it can take decades to build up cash value. It is, however, a fairly safe investment that can yield consistent returns in some cases.
Debunking life insurance myths
The medical exam is scary, too time-consuming, and/or invasive
Many people put off getting life insurance because they’re hesitant to go through what they think will be an invasive health screening.
However, the medical exam is easier and quicker than most people think.
Insurers often provide applicants with a variety of options for taking the test, including sending a paramedic to their home or workplace to take the samples.
During the exam, you will answer some questions about you and your family’s medical history, much like the questionnaires you take when you visit a doctor for the first time. After the questions, the technician will ask for a urine sample, and draw blood to check cholesterol levels, blood sugar, and detect any evidence of tobacco or drug use. They will also weigh you, note your height, and take your blood pressure.
In some special cases--for very large policies, older applicants, or those with a history of heart disease--it might also involve an electrocardiogram. For most people, though, the whole process takes less than 30 minutes, in other words, a fraction of the time of a doctor’s visit.
I’m young and healthy, odds are I’m not going to need it.
Without falling into fear mongering, the chances of a catastrophic accident may be higher than you think, and have very little to do with anything under your control. In fact, in the latest year for which the Center for Disease Control has national data (2016), the leading cause of death for Americans aged 1-44 was unintentional injury, not disease or cancer.
Instead of thinking about not needing life insurance at this exact moment, think of it this way: will anybody be affected by the loss of your income? If the answer is yes, and someone is going to be stuck paying off your debts or would be worse off financially, then getting life insurance is important. And being young and healthy right now means that you can get a policy with higher coverage limits, for a lot less than you’ll be able to further down the road.
Life insurance is a purchase for your future, for the “just in case.” Even if you only have vague plans for kids within the next ten or fifteen years, getting married, or starting a business, there are definite upsides to purchasing life insurance early. The older you are, the more expensive the policy--with average yearly increases between 8%-10%. It simply makes good financial sense to look into your options early, before age, dependents, or significant debt make a policy more expensive.
I’ll get it eventually
The absolute best time to get life insurance is now.
If you’re young, healthy, and have no dependents, there’s a better chance of being able to get rates you might not qualify for later on. To give you a better idea of what we mean, here are some numbers for you.
There are a few different things we can glean from the image above. The first is that life insurance rates remain fairly stable from ages 18-30, and then from 30-35, after which they increase dramatically. And if your term policy should expire after age 35, renewal will therefore be expensive.
It's too expensive
“When it comes to life insurance, find out what you need and see how you can approximate it, given your budget,” says Chris Huntley, founder of Huntley Wealth & Insurance Services and Insurance Blog by Chris. “If all you can afford is a policy for $10,000 even though calculations say you need $50,000, getting the policy for $10k is better than not at all"
A second common misconception of life insurance is that the cost is too high. According to a 2017 joint study by insurance research organization LIMRA and non-profit educational organization Life Happens, 66% of surveyed consumers don’t purchase life insurance because they believe it’s too expensive. In fact, it turns out they wildly overestimated the cost, posing a monthly payment of $500 for a healthy, 30-year-old with a term life policy of $250,000. This is two and a half times the actual amount of $200. Of course, how much your policy will cost depends on a number of factors, which we will discuss in more detail further down.
We understand that $200 may be too much of a draw on your monthly budget, yet think about the alternative. How much would it cost if you weren’t around anymore? How would your family manage with the loss of income? How would your debts get paid off?
Death has a way of adding up in ways you may never have expected. To start, there are the burial expenses, which average between $7k-$10k, ($3k for a cremation). Even if you don’t have a significant other, children, or a dependent (elderly or otherwise), then there’s still the settlement of any outstanding debt or back taxes, and mortgages to pay off. And should you have people depending on you, it’s likely that the loss of your wages will be a significant blow to the family finances, not to mention the expense of grief counseling, if needed. If the death was the result of a long illness, such as cancer, there may also be significant medical debt.
There are some ways to reduce the cost of your policy, besides the big ones such as quitting smoking (or never having done so in the first place), and avoiding high-risk activities (e.g. sky-diving, rock climbing, auto racing, private piloting, etc).
Stay-at-home parents don’t need life insurance
Life insurance is often thought about in terms of replacing lost income. But there are some family members whose work is just as valuable, even if he or she doesn’t bring in a yearly salary: the stay-at-home mom or dad. According to the Pew Research Center, there are more than eleven million stay-at-home parents in the U.S., yet many don’t consider taking out a life insurance policy for themselves.
Though their work may not be as visible--they’re tutors, caretakers, housekeepers, cooks, chauffeurs, and more--outsourcing it would cost the equivalent of an annual salary of $113,000 (as per calculations by Salary.com).
So, what should a stay-at-home parent’s policy benefit limits be? Chris Huntley recommends that non-working spouses, even if not a parent or primary caretaker, take out coverage in at least half the amount of the working partner.
“You’re not just losing their income; you’re losing all of the ways they help your family… that might mean they’re helping to keep the house, helping take the kids to school, watching the kids. All of the care they provide is expensive if you want someone else to do that. You can’t just look at their income; you have to look at what they’re providing to the family and the potential replacement cost,” says Huntley.
Tips for reducing your life insurance costs
Know how much you need
The fact is that most people’s estimates of how much insurance they should get are wildly off-base, with 40% considering three times their salary sufficient--despite industry professionals recommending policies 7 to 10 times their annual income--. The best way to accurately calculate your life insurance needs is by adding up all additional sources your beneficiaries can expect to access (e.g. Social Security, retirement accounts, or pensions). Then subtract that from the amount you’d like to realistically leave your spouse or dependents. The resulting number may seem low, maybe around $30,000. Ten times that amount is $300,000: the size of your ideal policy. Of course, this should be tailored to your specific circumstances, and we always recommend erring on the side of caution. At the end of the day, a little is better than none.
Choose the right amount of coverage for you
Remember, the longer the term, the more expensive your policy. Many people hear the phrase “whole life” and think it’s ideal to be covered forever, for all intents and purposes. However, this comes at a steep cost, and the benefits may not outweigh the investment. In most cases we recommend that consumers take out term policies rather than whole life. Though these will expire eventually, when timed right, coverage should only end once your children have left home or your mortgage has been paid. And at that point, receiving the lump sum of all the premiums paid comes as a windfall.
Consider multiple policies
Just as a long term makes life insurance more expensive, a high benefit limit will also up your premiums. By obtaining several life insurance policies, (possibly with different insurers and term lengths), you may be able to minimize your costs. There isn’t a limit to the number of policies you can have at once, but the total death benefit must correspond to your income and assets. In other words, red flags will be raised should you attempt to get millions and millions of dollars in coverage, with an annual salary of $65,000.
Incorporate healthy habits
Life insurance is all about risk assessment. The healthier you are, the less likely it is that your insurer will ever have to pay out, which is an outcome you’d both like to avoid. Small, simple steps can have outsized results: cutting down on alcohol consumption or working out a few times a week can make a major difference in your policy. Even if you started with less-than-ideal lifestyle habits, if you can get a chronic medical condition under control, quit smoking, or lose a significant amount of weight, you may be able to negotiate a lower premium. Anything that can be proven to increase your life expectancy can be leveraged for a less expensive rate.
Shop around
Life insurance is a highly competitive industry, and insurers are looking for your business. Comparison shopping is essential for all large purchases but particularly so for life insurance, where two similar companies can offer virtually the same policy for hundreds of dollars less due to different underwriting algorithms. After all, while one insurer might view all diabetes patients as risky, another one might give them credit for a healthy lifestyle that keeps blood sugar under control. To better compare differing plans, a good tip is to ask about each one’s net cost index, which should be provided by the company, agent, or broker. The math to do this is a little bit complicated and we won’t get into it here. All you need to know is that it collapses two variables (the premiums vs the cash value) into one single number. The lower the cost index for your gender and age, the less it will cost you (for the same terms).
Pay annually instead of monthly.
Like many others, life insurance companies will reward customers who pay up front and, according to Huntley, doing so could save you up to 8%.
Use an independent agent or agency.
There are many benefits to choosing an independent insurance agent, especially if you have less-than-stellar health and you’d like someone to negotiate for you. If you are considered a somewhat higher risk, and are getting unaffordable rates, then a reputable, experienced independent agent could be the best choice for you.
What Type of Life Insurance Should I Get?
Life Insurance Group Classifications
Insurers classify applicants into five categories, based on their health condition. While the names vary slightly, they usually are something along the lines of Preferred Plus, Preferred, Standard Plus, Standard, and Substandard.
People that fall in the Preferred Plus category are almost guaranteed approval and will get the lowest rates, while people in the Substandard category will pay the most, sometimes as much as 250% more than those in the slightly higher Standard category.
In addition to these, insurers add two other categories, just for smokers: Preferred Smoker and Standard Smoker. It’s important to note that most insurers consider you a smoker even if you just occasionally smoke a cigarette or a celebratory cigar now and then.
When an applicant has ongoing or past medical conditions, a history of drug or alcohol use, criminal records, or a high-risk occupation, insurers turn to “table ratings”. These ratings usually have 16 categories of increasing risk, which add a percentage amount to the premium you’re offered.
Pre-Existing Conditions
On to the good news: you don’t need perfect health to get coverage at an affordable rate.
Yes, your health condition will be one of the biggest factors in determining whether you’re approved and your monthly rate. However, even if you’ve had major health problems in the past or are currently facing them, it doesn’t mean you’re uninsurable.
Even if you received a “table rating,” it doesn’t mean every insurer will place you in the same category, since every each company’s actuarial math is a bit different. Many insurers recognize that past health problems don’t necessarily mean future problems, especially if the underlying conditions are being managed effectively by medication and conscientious health habits.
This has led some insurers to offer “health credits” options. With these programs, insurers reward you –and may even bump you up a category or two– for ongoing healthy lifestyle habits, such as regular exercise, keeping cholesterol and blood pressure at the recommended levels, and quitting smoking. Even chronic conditions like diabetes don’t necessarily translate into unaffordable premiums, especially if you can show that you manage it successfully through diet and taking medication as prescribed.
Needless to say, if you’re a smoker, the single most valuable thing you can do –both for your health and your pocket- is quitting.
Why does every insurance company ask about smoking habits?
The simple answer to this is that smoking tobacco, whether via cigarettes, cigars, or vaping, is a huge health risk and therefore carries a higher cost (averaging 15-20% more in monthly premiums than non-smokers). Any amount of smoking or nicotine consumption within the time period framed in the insurer’s question (even if it’s only a cigarette or two on the weekends, or through a nicotine patch), automatically qualifies you as a smoker in the company’s eyes.
In fact, many companies will continue to consider you a smoker for as long as five years after you can pass a urine, blood, hair, or saliva test for levels of nicotine and cotinine in your system.
On the plus side, if you can prove you’re either in the process of quitting or have plans to do so in the immediate future, some companies may allow you to retake the medical exam after 18 months. Your age also plays a factor, as with any insurance policy. A 30-year old smoker will pay less than a 50-year old one, on the theory that they have a better chance at quitting, and less lasting damage to their health.
While the prospect of expensive monthly premiums may tempt some consumers to simply lie about their tobacco habit, failure to disclose what is considered a significant health condition constitutes insurance fraud and may have serious consequences if you’re found out.
Most insurance companies run further checks on the medical history of approximately one-fifth of their applicants, which may uncover a lie about smoking. And if, say, a policyholder should develop one of any number of smoking-related illnesses (e.g. cancer, heart diseases, metabolic or pulmonary diseases), and their tobacco use is uncovered, the insurer may cancel the policy altogether or refuse to pay out. Alternatively, the company may calculate how much less you’ve paid on your policy (say, 70% of what you should have), and themselves only pay out 70% for medical costs.
Pregnancy and life insurance
For many, bringing a child into the world is a catalyst for getting life insurance. While pregnancy should not affect your rates, some common pregnancy-related conditions, such as gestational diabetes or high blood pressure, could make your premiums sky-rocket. These complications typically arise later in the pregnancy, which makes it extremely important to start the life insurance application process as early as possible. This can help you get the best rates and ensure you have coverage all throughout the pregnancy.
What to Watch Out for When Buying Life Insurance
The unlicensed company or agent
The importance of making sure the company is licensed by the state where you live cannot be overstated. The life insurance industry is subject to strict regulations, and states have placed safeguards protecting consumers in case an insurer goes out of business. Insurers are required to contribute to guaranty associations, which – if one of them were to go bankrupt – would cover the outstanding claims. This ensures that claims will get paid even if your insurance company closes its doors.
Checking for a license is important for another reason: there have been cases of fake insurance agents defrauding consumers by offering policies from non-existent companies. In these scams, pseudo-agents will offer legitimate-seeming documents from either reputable or fictional companies and even collect premiums from unsuspecting consumers.
If an agent you don’t know offers a policy you did not request, with prices that seem to be way below what others are offering, consider it a red flag. As the National Association of Insurance Commissioners (NAIC) emphasizes, the best course of action is to “stop, call, and confirm.” Call your state’s insurance department and ask for licensing information for both the company issuing the policy and the agent you’re dealing with before you sign on any dotted lines.
The unnecessary whole life policy
While many well-intentioned insurance agents suggest whole life policies to their clients because they believe it’s the best choice, there are plenty of instances in which unscrupulous agents push the most expensive policy in order to increase their commission. Regardless of their motivation, it’s important to be clear on what you hope to achieve with your policy and what you can afford long-term.
In most cases and for most people –especially parents– term life is really the best choice. Not only is it more affordable, but it covers the period of time when their children would most need their income. Even childless consumers who would leave behind a spouse and a mortgage may find that term life is also the best choice, especially if the death benefit is large enough to cover what is still owed on the mortgage note.
Having said that, there are a few consumers for whom permanent life insurance is a good idea: high-net worth individuals who are using it for estate planning, people who have maxed out their other retirement plans, and caretakers of disabled children or adults who will need care throughout their lifetime.
Assuming you don’t qualify for affordable rates
Consumers who suffer from chronic conditions or have faced life-threatening illnesses often assume that they will only qualify for guaranteed issue policies, which are much more expensive than the traditional term policy.
However, insurance underwriting is a highly complex process, with different companies assessing risk in very different ways. This is especially true in life insurance, which takes into account every minute detail of your lifestyle, health, and even your family’s health, in order to decide whether to approve you or the amount of premium they’ll charge.
However, because each insurer has its own risk-assessment calculations, it’s important to get quotes from several different companies to get the best deal. If a pre-existing condition disqualifies you from one insurer or causes them to give you an unaffordable premium, don’t assume that this is the rate you will get from every company. Make sure to contact a reputable agent with experience in the industry who can negotiate with insurers on your behalf.
FAQs about Life Insurance
What is supplemental life insurance?
Employers commonly offer supplemental life insurance coverage, which you can purchase in addition to your group policy. Typically, you can double or triple the amount of your initial coverage by paying an additional amount, which the provider determines. Some life insurance companies offer supplemental coverage you can purchase directly from them rather than going through your employer.
If I’m single and don’t have dependents, is life insurance worth it?
If you’re single, debt-free, with some money saved up, and nobody relies on your income, having life insurance may not be strictly necessary. However, if you have people who depend on you for your income, then you should definitely consider taking out a policy. Most life insurance articles and guides focus on families, but there are many reasons for singles without dependents to purchase a small policy. One of the most important is debt—whether it’s yours or you share it with a co-signer. Federal student loans may disappear when you die, but private student loans, car loans, mortgages and jointly-owned credit card debt will still need to be paid. Business owners with partners may also need to take out life insurance as a contractual obligation, in which case we recommend talking with a financial planner. Even if you don’t have kids today, should you have some in the future, taking out a policy when you’re young (and premiums are lower) is a good financial strategy. Further down the road, you can always add another policy or increase your coverage. Planning for the future this way is also applicable to people with a high chance of inheriting a significant health issue. Finally, even if you have no debts, kids, and elderly or sibling dependents, end-of-life expenses can be much more than you might think. The daily cost of being in an ICU can be as much as $10,000 daily, while the average funeral costs between $6,000 and $9,000. A modest $10,000-$25,000 policy can cover most of these expenses and ensure that your friends or family don’t have to incur any expenses on your behalf.
How much does life insurance cost?
The cost of your life insurance policy will vary on a variety of factors, including your age, health, smoking status, the type of policy you purchase and the insurance company you select. Younger people will generally qualify for the lowest rates, while older people will pay more for their policies. You can comparison shop with different life insurance companies to minimize your rates.
What does life insurance cover?
Life insurance can be useful for paying off debts, like the mortgage on your home or higher education expenses. Proceeds from life insurance policies also are useful for covering your funeral and burial expenses. Your beneficiaries can use the money to replace your income, allowing them time to grieve without worrying about expenses.
What is cash value life insurance?
Cash value life insurance accumulates monetary value as you regularly pay your premiums. Cash value life insurance policies allow policyholders to withdraw money during their lifetime, which can be helpful if unexpected expenses arise or you simply want an additional income stream during retirement. Like universal and whole life plans, permanent life insurance policies frequently have cash value options.
Can you have multiple life insurance policies?
While it is completely legal to have more than one life insurance policy, there are usually limitations on the total amount of coverage you are allowed to have at one time. A good general rule is to purchase between 15 and 30 times your income, depending on your age and insurer. Most consumers won’t ever run into this issue, as the legal guidelines are fairly generous within reason. Essentially, this means that reputable insurance companies won’t sell you millions of dollars in coverage if you’re single, with no dependents, and your yearly salary is within the national average. There are a few reasons why taking out more than one policy may make good financial sense, however. Laddering, or taking out multiple policies whose total coverage is the same as one large insurance plan, may save you a considerable amount of money. Divvying up the insurance between different companies also hedges your bets, making sure that even if one policy doesn’t come through, there will be two more available. Finally, having more than one policy also allows you to purchase different types of coverage for different needs. Getting a term life policy for short-term needs such as eventually paying for college or covering a mortgage makes sense. Once that term ends after thirty years, you’ll likely find that taking out more insurance for final expenses or inheritance purposes will be considerably more expensive, as you’ve aged and may have developed health concerns. If you’d taken out a guaranteed universal life policy at the same time as when the term life insurance, rates would still be low.
Can you convert term life insurance into a whole life policy?
Converting term life insurance into a whole life policy is certainly possible, though your premium will likely go up. If you are completely sure you want to change your policy, many companies will permit the upgrade under the original health rating, regardless of any changes in your health. Other limitations will depend on the company and your original term policy, but they may include an age limit, or offer only a whole life policy. Some term life insurance also has conversion credits, which reduce the first year of new premiums by the amount of the original policy’s premiums. Another possibility is a partial conversion, should a full one prove unaffordable, or the coverage amount be considered too high. Converting only half of a $500,000 policy means that you’d pay the whole life premiums for $250,000, while still paying the term policy’s premiums for the remaining $250,000 until its expiration date.
Are there any no-exam policies?
Two main types of policies do not require a medical exam: simplified issue and guaranteed issue. While simplified issue policies do require that the applicant answer questions about their medical history, guaranteed issue policies do not. Unsurprisingly, because of the high level of risk involved for the insurer, guaranteed issue policies are significantly more expensive than those that do require a medical exam. This means that, due to the price, most consumers would do better with the more traditional type of policy. However, those with chronic, serious health conditions, who have had trouble getting approved for a term or whole life policy, might find either a simplified or guaranteed issue policy a good option. Death benefits for simplified issue policies usually top out around $50,000 for whole life and $500,000 for term insurance. On the other hand, guaranteed issue policies offer lower death benefits, typically just enough to cover funeral and minor medical expenses. Another thing to watch out for is making sure your simplified issue term life insurance policy has level premiums or is referred to as “level term.” This means that the premium will stay the same for the entire life of the policy. If your policy doesn’t feature level premiums, you may have been offered insurance within a specific age group. After five years or so, you’d fall into the next age group, and your premium would go up. Over the course of a decade or more, the policy could become prohibitively expensive.
Does marijuana use affect life insurance rates?
The not-so-simple answer is: it depends. Some insurers will classify you as a smoker, and some won’t. They will ask you how often you smoke marijuana and for what reason in order to determine whether to classify you as a smoker. “It’s very counterintuitive. If you have a prescription for marijuana use, that could actually be worse for you than if you used it recreationally,” says insurance expert Huntley. This, he says, is because people who get a prescription for medicinal marijuana will have to disclose their health problems in order to get a prescription. Once those conditions appear in the medical file, they’re considered pre-existing conditions and can cause insurers to hike up their rates accordingly. This is true even for mental health conditions like anxiety or depression, which can cause your premium to double or more. In other words, you may not be classified as a smoker due to marijuana use, but you could still have to pay higher premiums because of the condition that necessitated marijuana use.
Our Life Insurance Review Summed Up
Company Name | The Best for |
---|---|
State Farm Life Insurance | Best Life Insurance for Seniors |
Mutual of Omaha Life Insurance | Best Life Insurance for Young Adults |
Gerber Life Insurance | Best Life Insurance for Kids |
Northwestern Mutual Life Insurance | Best Life Insurance for Families |
Haven Life Insurance | Best Insurance for Smokers |