We may receive payment from affiliate links included within this content. Our affiliate partners do not influence our editorial opinions or analysis. To learn more, see our Advertiser Disclosure.
Term life is often a good choice for people who want an affordable life insurance option to cover specific financial obligations. For example, you might want term life insurance to cover the years left on a mortgage or the years until your children have graduated from college.
But prices are only one component of a good term life policy. You’ll want to consider the benefits within the policy that could become important many years after you purchase the coverage.
We used data provided by Life Quotes, an online, independent life insurance agency, to evaluate the best term life insurance companies based on rates and coverage features.
Highlights: Transamerica is our top pick because of its top-notch policy benefits and very good rates. You can renew your policy up to age 105 and living benefits are available for chronic illness, allowing you to tap your own death benefits for cash if your illness qualifies.
Potential drawbacks: If you want to convert your policy to a permanent policy, you will only have until age 70 to do so, unless you were in excellent health when you applied.
Highlights: AIG’s term life insurance has a good range of policy benefits and excellent rates across a range of ages and coverage levels. You can renew your policy up to age 95.
Potential drawbacks: There are no living benefits, and the option to convert to a permanent policy is available only up to age 70 (some competitors allow up to age 75).
Highlights: Pacific Life has excellent prices and solid policy benefits.
Potential drawbacks: No living benefits and the option to convert to a permanent policy only up to age 70. You can renew your policy up to age 90, while many companies allow conversion at higher ages.
Highlights: John Hancock has highly competitive rates compared to top competitors. You can renew a policy up to age 95.
Potential drawbacks: No living benefits and tighter coverage-decrease rules compared to many other insurers. You won’t be allowed to decrease your coverage in policy years one to three and then a 50% decrease is allowed in policy years four to six.
Highlights: Lincoln Financial has excellent coverage features combined with competitive rates. You can renew a policy up to age 95.
Potential drawbacks: No living benefits are included.
Highlights: Protective deserves consideration if you’re rate-shopping for term life.
Potential drawbacks: The maximum ages for renewing or converting to a permanent life policy are lower than the ages for some other companies.
Highlights: SBLI has very competitive rates and a better ability to decrease your coverage amount compared to other insurers.
Potential drawbacks: There are no living benefits and you can only renew your policy up to age 85. Other top competitors have higher maximum guaranteed renewability ages.
Highlights: Securian Financial offers more ability to decrease coverage compared to other insurers.
Potential drawbacks: Term life insurance rates are good but, still, you can find better rates among top competitors. There are no living benefits and guaranteed renewability is only up to age 85.
What Is Term Life Insurance?
As the name suggests, a term life insurance policy covers a certain term, or time period. You pick the length of the policy when you buy it. Terms typically begin at five years, but also can be 10, 15, 25, 30, 35 or even 40 years.
You may be able to renew a term life policy or convert it into a whole life insurance policy. Unlike a term life policy, a whole life policy provides lifetime coverage and accumulates cash value.
Aside from selecting the length of a term life policy, you select the amount of coverage. A coverage amount can be in the millions of dollars. If you die during the policy’s term, your designated beneficiaries receive a payout known as a death benefit.
Who Is Term Life Insurance Good For?
Term life insurance can be ideal for people who need life insurance to cover a specific large debt or a set period of time. It can be particularly attractive for a parent who’s raising young children and wants their kids to be financially protected if the parent were to pass away.
Here are four reasons why someone might buy term life insurance:
- It can replace income lost due to the death of the insured person.
- It can pay off a big debt, like a mortgage, to ease a family’s financial burdens.
- It can cover college tuition if a parent passes away.
- It can pay funeral expenses.
Tips for Buying Term Life Insurance
Here are five tips for buying term life insurance.
- Consult your financial advisor. Before you dive into purchasing a term life insurance policy, visit with a financial advisor to assess your current and future finances. This review can help you determine if term life insurance is the best fit for your larger financial goals.
- Figure out the length and coverage. To decide on the best length of a term life insurance policy, examine the length of the debt or situation that you want to cover. For instance, let’s say you recently purchased a new home with a 30-year mortgage. In that case, you might want to buy a 30-year term life policy.
- After settling on the length of the policy and the coverage amount, compare rates among several insurers. This can be done online or with assistance from an independent insurance broker or agent.
- Look at whether the policy offers a conversion option. This option will give you a certain amount of time to convert the policy from term life to a permanent life insurance policy, such as universal life insurance. This gives you the opportunity to switch to a permanent policy without going through a new medical exam.
- Get ready to complete the application. When you fill out an application for a term life policy, be prepared to answer questions about your medical history and family history. You’ll likely be asked about things like medications you take, your driving record, habits such as smoking or drinking, and dangerous hobbies. Whatever you do, don’t lie on the application. If an insurer determines that you misrepresented any information, your application can be rejected. Worse, if the life insurer discovers that you misrepresented information only after you buy the policy, the policy can be void.
We used data provided by Life Quotes to evaluate term life insurance companies based on:
Two-thirds of total score: Term life insurance rates.. We scored each company’s rates for 20-year term life insurance coverage for amounts of $500,000, $1 million and $2 million, for non-smoking healthy men and women of average height and weight, at ages 30, 40 and 50.
One-third of total score: Policy features. This category used living benefits (which can provide an early payout option if you become ill and meet the eligibility requirements for living benefits), the availability of term life conversion, guaranteed renewability of the policy, and the ability to change the face amount after you buy the policy.
John Egan is a freelance writer, editor and content marketing strategist in Austin, Texas. His work has been published by Experian, Bankrate, National Real Estate Investor, U.S. News & World Report, Urban Land magazine and other outlets.