Best Term Life Insurance: 6 of The Best Policies In 2021
Although it may seem rather morbid, preparing for your own death is a practical financial decision. This is especially true when you have people like your spouse, children, or even elderly parents who rely on you. One of the best ways to ensure their security is by purchasing life insurance. It provides you with the assurance that, should anything happen to you, your dependents will have some kind of financial safety net.
But for some, a policy can be seen as a luxury – the cost of maintaining a permanent plan can run in the hundreds. For those who want to prioritize their mortgage, children’s tuition, or outstanding debts, shelling out this much on a yearly basis just doesn’t seem like the practical decision it’s supposed to be.
In this case, a term life insurance policy may be a good option. It’s a type of life insurance that provides short-term protection for only a fraction of the cost of a permanent life policy.
So how do you choose the right term policy? In this article, we help narrow down your options with a list of some of the best term life insurance policies of 2020.
What Is Term Insurance?
Term life insurance is a type of life insurance that provides coverage for a set duration or a term. Terms can last anywhere between five and 40 years. The most common length is 20 years.
If the policyholder passes away during the term, their beneficiaries – usually a spouse or children – will receive a previously agreed upon amount as a lump sum. If the insured outlives their term, they can choose to renew their policy or let it expire. If they choose the latter, their loved ones don’t receive any benefit.
When compared to permanent life insurance policies like whole and universal life insurance, term life is the most affordable option. Because of its reasonable price range and short-term coverage, term life insurance is ideal for:
People who are on a limited budget
People who want coverage while they pay off short-term debts, such as small-business owners
People who are paying for financial obligations that eventually end, such as mortgages and college tuition
However, term life insurance doesn’t have many features compared to other types of life insurance policies. For example, aside from lifelong protection, whole and universal policies also come with a cash value – an interest-earning account that policyholders can use to save and invest their money. You'll be hard-pressed to find a term policy that also comes with a cash value account. As such, universal and whole life policies are better for people who are looking to grow their money.
Term life insurance expires too, meaning that policyholders will eventually have to choose between converting their policies or applying for another one – this might require another set of processing fees, medical exams, and the like.
Life Insurance Costs
Like with most policies, the cost of a term life insurance policy will depend on an applicant’s age, gender, lifestyle, and health status. This is because life insurance companies are always looking to minimize risks. We always encourage people to purchase life insurance while they’re young and healthy to save money.
The amount of life insurance coverage you need and the length of time you’ll need it for, also affect the cost of your premiums. As such, we always compare life insurance quotes with the industry average for the same profile. For example, we’ll request a quote from one company for a 25-year-old man who needs $500,000 worth of life coverage for 20 years, then compare it to the industry average ($27.01) to find out if it’s reasonable or not.
We also took customer reviews and AM Best financial strength ratings, Better Business Bureau ratings, and National Association of Insurance Commissioners' ratings into consideration – this is why you’ll find some life policies from companies in our list that didn’t make the cut for the NAIC or AM Best.
From there, we looked at each company’s term life insurance offerings and evaluated them on the following points:
Price - We compare quotes with the industry average for the same profile.
Coverage amount - Most companies offer between $100,000 to $1 million in coverage.
Term duration options - Most insurance companies offer 10 to up to 40 years of coverage.
Riders offered - Waiver of Premium, Accelerated Death Benefits, and Child Riders are some of the most commonly offered add-ons.
Special features - This could be free riders, wellness programs, payment schemes, etc.
The 6 Best Term Life Insurance Of 2020
Here are our top picks for the best term life policies in 2020.
Prudential Term Elite Life Insurance: Affordable Rates for Older Applicants
Life insurance premiums tend to get more expensive as you age. This has to do with risk – the more risks you pose to a company, the more you can expect to pay in premiums. This is also why people who work in high-risk occupations or are predisposed to certain conditions will likely be charged higher for insurance as well.
There are some companies, like Prudential, that provide affordable rates to certain demographics. As far as life insurance companies go, Prudential is a household name. Currently, the company has approximately $4 trillion of gross life insurance in force around the world and ranks 53rd on the Fortune 500 list.
Prudential’s Term Elite life plan is pretty standard on most accounts. Available to those between the ages of 18 and 75, it comes with a starting death benefit amount of $100,000 and four options for term durations – 10, 15, 20, and 30 years.
It comes with living needs benefits as well, which is an accelerated death benefit rider that allows policyholders to access a portion of their benefit if they become terminally ill. Other riders include accidental death benefits, waiver of premium, and children’s protection.
Aside from these, the policy is also convertible to a permanent policy without the need for additional medical exams. And if you convert within the first five years, you get a premium credit.
The kicker is that a quote for a $500,000 death benefit for 20 years is cheaper if you’re in your 60s. Compared to the industry average of $504, a healthy 60-year-old can expect to be charged $450 for a policy. Rates are higher-than-average for those in their 20s and 30s.
AIG Select-A-Term Life Insurance: The Most Options For Term Durations
Most life insurance companies offer 10, 15, 20, or 30-year term durations. However, it’s possible that fully paying your mortgage or kids’ tuition will last longer or shorter than these terms. In cases like these, people tend to over-insure and end up paying for insurance they don’t really need. AIG’s Select-A-Term policy is excellent for these kinds of situations.
AIG has been around since 1919 and currently operates in over 80 countries and jurisdictions. The global brand offers a wide range of financial services, from life products to investments.
AIG’s Select-A-Term policy offers 18 term durations – more than any other life insurance company we’ve reviewed. You can choose between 10 years, any number between 15 and 30 years, or 35 years’ worth of coverage. So if you only need 16 years of coverage, you can get exactly that.
This policy comes with a minimum death benefit of $100,000 and a maximum of $1 million. Those aged 0 to 75 years old can qualify for this policy. AIG’s plan is convertible to permanent life insurance as well, but renewal stops at 95.
As for pricing, AIG is fairly competitive. When we requested a quote for $500,000 for 20 years for a male non-smoker in his 20s, we got $24.74. This is compared to the industry average of $28.02.
John Hancock Term Life Insurance: An Insurance Policy That Rewards Healthy Habits
People purchase life insurance because they know that death is inevitable – it’s just a matter of when. But what if your insurance policy could help you prolong that inevitability? Some insurers, like John Hancock, encourage healthier habits with wellness programs.
John Hancock is a life insurance company that has been around for over 150 years. Their term life insurance is pretty standard. You get $25,000 to $65 million worth of coverage for a choice of 10, 15, or 20 years. You cannot add riders to your policy.
In 2015 Boston-based company became the first in the United States to offer a wellness-based rewards program in partnership with the Vitality Group. Essentially, how it works is that the more active you are, the higher you can earn. You can choose between two wellness program options:
Vitality GO: This program is available at no additional cost and comes with up to 40 percent off on wearable fitness devices, up to $15 monthly savings on fresh produce, and free subscriptions to healthy living publications.
Vitality PLUS: The program is priced at an additional $2 a month and comes with all the benefits of the GO plan, plus an additional 15 percent in annual premium savings, an Apple Watch for as little as $25 or a free Fitbit, and up to $600 in annual savings on produce.
When it comes to rates, John Hancock is quite average. For a healthy male in his mid-20s requesting $500,000 worth of coverage for 20 years, John Hancock provided a quote of $27.66. This is in comparison to the industry average of $28.02.
Note: The Vitality Program also comes with John Hancock's whole life offerings.
State Farm Instant Answer Term Life Insurance: Budget-Friendly, Low-Commitment Life Insurance
The insurance application process isn’t always a walk in the park. In fact, aside from the price, it is often the long and tedious process that turns some people off from applying. In a study, LIMRA found that half of all consumers are more likely to purchase insurance if they don’t have to take a medical exam.
At State Farm, you can get a budget-friendly term life policy without the medical exam requirement. State Farm is a banking and financial company that offers several different products, from investment options to home, auto, property, term, and whole life insurance. State Farm’s home and auto insurance products are frequently cited as some of the best, often featured in lists like Forbes, Business Insider, and CNet.
State Farm offers three term products: Select, Return of Premium, and Instant Answer. The latter is a guaranteed issue policy (meaning no medical exam required) that provides $50,000 worth of coverage for up to 10 years or age 50 (whichever comes first).
You can look at the State Farm Instant Answer policy as a kind of “starter insurance” for those who want to try life insurance without going through the tedious application process. The policy is available to those aged 16 to 45.
Principal One-Year Term Life: Short-Term Insurance
If 10 years is too long a term, you can opt for Principal’s One-Year Term policy, which provides coverage for only 12 months.
Principal is a Des Moines, Iowa-based insurance company with 32 million customers. It currently has the 201st spot on the Fortune 500 list. The company offers several financial products, from mutual funds, annuities, retirement solutions to term and permanent life insurance products. They also have a ton of resources on financial matters on their website.
Principal’s One-Year Term policy is, as its name suggests, only valid for one year. It provides policyholders with a minimum death benefit of $200,000 and comes with no rider options. It is available to those aged 20 to 99 years old and is non-renewable.
Lincoln TermAccel Life: Fastest Approval Time
The average life insurance application takes about three to eight weeks to process, depending on a person’s health status. If this feels like too long a wait for you, there are faster options at Lincoln Financial Group.
Lincoln Financial Group is a financial and insurance company named after the former US president Abraham Lincoln. The company has been around since 1905 and managed to reach $100 billion of insurance in-force by 1983. The company has sustained its position as one of the top financial companies and life insurers in the United States up to this day.
Lincoln’s TermAccel provides $100,000 to $1 million worth of coverage for 10, 15, 20, or 30 years. It is available to those aged 18 to 60 and can be converted to a permanent policy before the term ends or before the policyholder turns 70 (whichever comes first).
The standout feature of this plan is the fast turnaround time. According to the Lincoln website, applicants can expect approval in as few as two days.
As for pricing, Lincoln is able to offer fairly competitive rates. We were offered a quote of $20.42 for $500,000 worth of coverage for 20 years. This is compared to the industry average of $28.02 for the same profile.
These are term life policies that are pretty standard but deserve some attention as well:
Northwestern Mutual Level Term 10
Coverage amount: No information available online
Term duration: 20 years
Why it deserves praise: Northwestern Mutual is currently rated as one the best life insurance companies in the US, taking the number one spot on the National Association of Insurance Commissioners' list. The company offers a wide array of term and whole life insurance products.
Northwestern Mutual Level Term 10 is a 20-year plan that provides coverage for 20 years. There are two premium payment periods. In the first phase, premiums remain level for 10 years. Afterward, premiums will be based on factors like your age and health and will stay level again for the next 10 years.
New York Life Term Life Insurance
Coverage amount: Starts at $10,000
Term durations: 10 to 20 years (sold in one-year increments)
Why it deserves praise: Like Northwestern Mutual, New York Life is one of the top five largest life insurers according to the National Association of Insurance Commissioners. The company offers a highly customizable plan where you can choose your exact term duration, opt for increasing premiums, and lock in level premiums for up to 20 years. New York Life also offers an exclusive rider that allows spouses to use the death benefit from your plan to apply for insurance sans the medical exam.
Mutual of Omaha Term Life Insurance
Coverage amount: $100,000 to $999,999
Term durations: 10, 15, 20, and 30 years
Why it deserves praise: This option comes with level premiums (meaning premiums stay the same throughout the term) and one of the highest issue age limits we've seen – 18 to 80 years old.
Transamerica Trendsetter LB
Coverage amount: Up to $2 million
Term durations: 10 to 30 years
Why it deserves praise: This plan comes with a free living benefits rider that ensures policyholders receive additional benefits if they are ever diagnosed with a terminal illness requiring long-term care.
Learn More About Life Insurance
Whether you want to find the best term life, whole life, or universal life option, or are hoping to learn about more life insurance companies, you can find more information on our website. We also have lists for the best life insurance companies of 2020 as well as the best whole policies. For more personalized advice on personal finance, contact us to find out how we can help you.