Best life insurance companies March 2024 (2024)

Why do you need life insurance?

• Financial protection for your loved ones: A life insurance policy can provide financial support to your family members if you pass away unexpectedly.
• Provides peace of mind: Knowing your loved ones will be taken care of when you pass can be comforting for policyholders.
• Can be very affordable: Some life insurance policies have low premiums, especially if you purchase coverage while you’re young and in good health.
• Customizable for your needs: You can customize a life insurance policy with riders based on your individual situation and coverage needs.

Our picks at a glance

What is life insurance?

Life insurance is a contract with an insurer that is meant to provide financial protection for your loved ones when you pass away. Your policy’s beneficiaries receive a death benefit when you die, which can be used for costs such as end-of-life expenses, funeral arrangements and income replacement. Some life insurance policies also build cash value, which you can access while you’re alive.

Types of life insurance policies

There are several different types of life insurance available. Here are the most common life insurance policies and how they work:

Term life insurance

Term life insurance provides coverage for a certain period, usually 10 years to 30 years. If you pass away during the term, your beneficiaries will receive a guaranteed death benefit. If you outlive the term, no death benefit is paid. Term life insurance typically has level premiums (they stay the same) and no cash value.

Whole life insurance

Whole life insurance is the most basic type of permanent life insurance (coverage for your whole life, provided you pay your premiums and meet cash value requirements). It provides a death benefit to your beneficiaries when you pass away and builds cash value overtime at a fixed interest rate. You can borrow against or withdraw your cash value.

Universal life insurance

Universal life insurance is a permanent policy that has adjustable premiums and a flexible death benefit. It builds tax-deferred cash value, which you can use to pay your premiums or borrow against as long you maintain a minimum balance.

Variable life insurance

Variable life insurance typically has fixed premiums and a minimum death benefit. The cash value gets invested into different subaccounts and grows based on investment performance. While there is greater cash value growth potential, returns aren’t guaranteed, so it’s possible your cash value account could lose money.

How to choose the best life insurance company for you

There are many options for life insurance, so it’s important to choose the best life insurance company for your individual situation. Here are some things to consider as you compare insurers:

• Third-party ratings: When evaluating life insurance providers, compare each company based on third-party ratings. If you want a company with excellent customer satisfaction, look for an insurer with good ratings from J.D. Power and low complaint rates with the National Association of Insurance Commissioners (NAIC). You should also check each company’s financial strength score from credit agencies like AM Best, Fitch and Moody’s.
• Premiums: Cost is another important consideration when choosing the best life insurance company. Life insurance premiums are personalized based on criteria like your age, health and gender and the type of policy you choose. Comparing quotes from several companies will help you find the most affordable coverage to fit your needs.
• Type of coverage and riders: There are a few types of life insurance and each one offers unique pros and cons. If you want lifetime protection, opt for a permanent policy. For more affordable short-term coverage, term life insurance might suit your needs. You should also find out what riders are available, which can fill gaps in your standard policy.

Benefits of life insurance

The best life insurance policies have a wide variety of benefits. However, the main purpose of life insurance is to provide financial protection for your loved ones if you pass away unexpectedly.

In the absence of your income, your beneficiaries can use a death benefit for any purpose, whether it’s paying the mortgage or covering final medical bills. The death benefit is typically tax-free, so your loved ones will receive the full amount.

Depending on the type of life insurance policy you have, you can also get guaranteed cash value growth, which is tax-deferred. You can withdraw funds from or borrow against your policy’s cash value. You can use that money for many purposes, such as paying your premiums or an outstanding debt.

Additionally, many life insurance policies are customizable. You can add riders to your policy for financial protection in certain situations. For example, an accelerated death benefit rider allows you to pull money out of the death benefit if you’re diagnosed with a terminal illness.

What does life insurance cover?

Life insurance provides a payout for your beneficiaries if your cause of death is natural or accidental. Life insurance also covers suicide, but there’s usually a two-year waiting period.

The money from a life insurance policy can be used for any purpose. However, the proceeds from a life insurance policy are often used to cover the following:

• End-of-life expenses, like final medical bills
• Funeral and burial or cremation costs
• Daily living expenses, like groceries and mortgage payments
• Childcare
• Charitable donations in the insured person’s name

What is not covered by life insurance?

Life insurance doesn’t cover everything. Here are some of the exclusions that most life insurance policies have:

• Death by suicide within the first two years of the policy being opened
• Death by homicide when one of the beneficiaries is involved
• Death by war or terrorism
• Death from engaging in illegal activities
• Death resulting from hobbies or jobs not disclosed to the insurer

Additionally, if you make fraudulent or misleading statements on your application, your beneficiaries may be denied the death benefit when you pass away.

How much does life insurance cost?

The cost of life insurance depends on many different factors. Some of these factors are personal, such as your age, gender, health and family medical history, and some are lifestyle-related, such as your nicotine use and hobbies. Other things that affect the cost are the type of policy you get, your coverage limit and any optional riders you add.

Below, you can see how life insurance rates vary depending on age, gender and policy type:

Do I need life insurance?

Life insurance isn’t essential for everyone, but many people can benefit from having a life insurance policy.

For example, if you have young children or multiple dependents that rely on your income, having life insurance can provide some peace of mind. The proceeds from a life insurance policy can be used as income replacement if you pass away. It can also be a good solution for older adults who don’t have savings and want to help their loved ones pay for their medical bills and end-of-life costs.

However, life insurance isn’t necessary for everyone. If you have sufficient savings and investments to financially support your loved ones in the event of your death, or if you’re single and have no dependents, paying for life insurance might not make sense.

How much life insurance do you need?

There are several methods you can use to calculate how much life insurance you need: the 10-times method, the value of life calculator and DIME.

10 times your salary

The 10-times method is the simplest way to calculate how much life insurance you need. Simply multiply your current salary by 10. So, if you earn $150,000 a year, then you should buy $1.5 million in coverage.

A variation on this calculation multiplies your salary by 10 and then adds the cost of your children’s college education. Since it’s hard to predict where (or if) your child will attend college, plan on adding $45,000 to $165,000 of coverage per child to 10 times your income.

Value of life calculator

This approach is a comprehensive estimation of how much money your policy’s beneficiary or beneficiaries will need to maintain their life if you pass away. Common inclusions in this calculation include your current savings and life insurance coverage, debts, your income and tax rate, additional assets, and how many years you have left until retirement. Using a value-of-life calculator makes the calculations much easier.

DIME method

The DIME method based your required life insurance coverage amount on four factors: debts, income, mortgage and education. Multiply your current income by how many years your family will need financial support if you pass. Then add up your total debts and your children’s projected college expenses. The sum of all of those numbers is how much coverage you’d need.

Methodology

To find the best life insurance companies, we started by examining 25 leading insurers and then narrowed it down to the top-rated 15 companies.

For each company, we analyzed eight crucial categories, leveraging data from trusted life insurance analytics specialist Veralytic, complaint data from the National Association of Insurance Commissioners (NAIC) and study data from customer-research firm J.D. Power.

Overall, we worked through over 250 data points to identify winning companies. The following sections describe the category we scored and the weight we gave that category in our scoring model.

Cost competitiveness (25%)

For cost competitiveness, we used data from Veralytic, which calculates a policy’s fees and costs per $1 of death benefit. It then compares a company’s aggregate and individual expenses to industry averages.

Average term life insurance rates (15%)

We calculated the average annual rate for a term life insurance policy for 30- and 40-year-old females and males. We based this category on term policies since they are the most readily available for gathering data and quotes and are less complex than permanent policies. The other categories we scored are either based on the company’s permanent life insurance policies or on its entire suite of life insurance products.

Cash value access (15%)

Building cash value is part of the appeal of a permanent life policy, but a policy can be frustrating if your options for accessing your cash value are limited. For this category, we used Veralytic data that rated companies higher if their cash values were higher and had greater liquidity than what’s typical for the industry.

Policy illustration reliability (15%)

An insurer’s illustration is a document that shows you all the important metrics you need to know about your policy, including the benefits your policy offers, your premiums, expenses you’ll pay through your premium, how long you’ll pay premiums and the policy’s projected death benefit and cash value. Because illustrations are critical to your buying decision, we’ve included a score for them. The score is based on a policy accuracy analysis from Veralytic, which scores a company based on how accurate its illustrations’ cash value and death benefit predictions are.

Historical performance (10%)

We used Veralytic ratings to judge a company’s historical performance. The ratings measure the average return for the past five years in an insurer’s cash value policies compared to the average returns of other insurers. Although past results don’t guarantee future performance, a life insurance company with a history of assets that have performed well can be a positive sign for policyholders.

Financial strength (10%)

A company’s ability to pay out your claim decades from now is a key point of trust. We used Veralytic scoring for financial strength, which compares an insurer’s ratings from AM Best, Fitch, Moody’s and Standard & Poor’s to other insurers. Each agency’s ratings reflect the rated company’s ability to fulfill its financial obligations and weather economic turbulence.

J.D. Power score (7%)

J.D. Power scores insurance providers based on five factors that are a key part of the customer experience: communication, interaction, price, product offerings and statements. We include J.D. Power ratings in our scores because they help you gauge what an insurer’s typical customer experience is like.

NAIC 3-year average index (3%)

The National Association of Insurance Commissioners (NAIC) calculates an index for insurance companies based on the company’s share of premiums and complaints filed with the NAIC. An index of 1.00 indicates the insurer received the expected number of complaints for a company of its size. An index below 1.00 means the company received fewer complaints than expected for a company of its size and vice versa. We took the average index for each company from the past three years.

What didn’t make the cut

Of the 15 life insurance companies we analyzed for our final rankings, six did not win a category. Of those six, five companies qualified to win a category because their scores were above our 3-star threshold for winners: AIG, and John Hanco*ck, Midland National, MassMutual and Securian. Though these companies scored well, they didn’t score high enough in any particular category to win. The remaining two companies, Ameritas was the only company to score below the 3-star threshold.