No one likes to talk about life insurance, but it’s one of the most important financial products you’ll ever buy. After all, you’re not purchasing life insurance for yourself; you’re buying it to take care of your family when you can no longer. Term life insurance will be the better choice for most people, if only because you can buy a lot of it for a low price.
We’ll talk about this more in a bit. We’ve put together this list of what we think are the best providers of term life insurance right now. This isn’t a list of the companies with the cheapest term life insurance. Instead, it’s a list of the companies with what we think are the best term products. AIG is the best from what we know about the seven best-term life insurance companies for 2022.
It is one of the biggest and most well-known insurance companies in the United States and has a wide range of permanent life insurance products if you ever want to add one to your term policy. Read on to find out what AIG has to offer. The most important thing you can do to get the best insurance price is to compare prices from different companies.
Why Should I Choose Term Life Insurance?
Most people should get term life insurance if needed, which is almost everyone. It’s better than permanent or whole life insurance in several ways:
- Low cost: It only costs about 10% of what whole life insurance would cost for the same amount.
- You can get more of it. Since it costs less, you can buy a bigger policy. For example, you can buy five times as much term insurance for half the price of whole life insurance.
- It’s flexible. You can keep a large death benefit at a time when you need it the most and then lower it when you don’t.
- Long periods: Most term life insurance policies are available for up to 30 years. That will cover the most important time in your life when you need life insurance.
- Many policies can be changed or renewed. Even when the initial term is over, you usually have the choice of turning the policy into permanent coverage or extending it for another year.
- Term life gives you more money to invest, while permanent life insurance policies highlight the benefits of investing in life insurance. But the truth is that you would be better off buying term insurance and putting the difference in an S&P 500-linked exchange-traded fund.
The distinction between whole life insurance and term life insurance?
The major distinction between term and whole life insurance is that term is only for life insurance. That is, life insurance doesn’t build cash value and doesn’t let you invest. It expenses a lot less than the whole life, usually only about 10% of the cost of the same amount of coverage with the whole life.
Whole life insurance is much more expensive than term insurance because it builds cash value. And while whole life insurance is permanent, term life insurance only lasts for as long as the policy says it will. But most of the time, you can renew a term policy at the end of the term for a certain number of years without having to show proof that you can be insured.
But because you will be older when the policy is renewed, the new premium will be higher. But fees are still a very important difference between the two. Term life has much lower fees than whole life because there is no cash value. With whole life insurance, the fees are so high that the cash value won’t build up much in the first few years.
This is the time in the life cycle of a whole life policy when a large portion of the premiums paid will go toward insurance costs. Term life insurance is the better choice if you don’t want to pay a lot for life insurance or if you need a big policy but don’t want to pay a big premium. It’s also the type of policy that financial advisors usually recommend.
How to Understand Term Life Insurance
The industry is going digital, but not for everyone
Like many other industries, the insurance business is moving increasingly toward an automated, online process. That cuts down on or gets rid of human interaction with the application. This is a big reason why buying life insurance online, especially term life insurance, is usually cheaper than working directly with a life insurance company or an insurance agent.
But you should also know that the process leads to a product that is much more tailored to your needs. For instance, you may have noted that online fintech companies are most likely to offer no medical exams. But they do that by being very picky about who they work with. Most only work with younger applicants who are in good health, or only work with younger applicants.
And if you meet both of those requirements, you should apply to one or more of these companies. But a full-service, human-assisted life insurance provider will be the better choice if you are over 50, have serious health problems, or have specific life insurance needs. This is a big part of why we gave AIG our highest rating. Fast and cheap isn’t always the best way to solve a problem.
Term life insurance is usually cheaper
Also, the main benefit of term life insurance is that it costs much less than permanent life insurance. It would help if you used that in every way possible. That means getting a higher death benefit at a lower cost than permanent coverage.
And while you’re at it, invest the money you’ve saved from your term life insurance. Because asset life insurance policies have such high fees, you will almost always do better by buying exchange-traded funds instead. After you buy your term life insurance, be sure to make use of this benefit.
An Analysis of the Most Effective Term Life Insurance
We ranked the seven companies based on the five things below to find the best term life insurance:
Maximum Policy Limit
Not everyone needs a life insurance policy worth a million dollars or more. Most of the time, coverage of anywhere from $100,000 to $500,000 will be enough for most people. But the coverage an insurance company offers is a big part of whether or not it’s a good company to work with. Having the option to go over $1 million, maybe by a lot, is an important choice.
This may be particularly true of term life insurance, which is often needed in larger amounts at few points in life than at others. For example, if you have a mortgage and are raising a family in your 30s or 40s, you may need more than $1 million in coverage. But once you’ve paid off your mortgage and your kids are grown up, you won’t need life insurance as much.
Policy Terms Are Offered
Most term life insurance policies last between 10 and 30 years. Only one of the seven best life insurance companies we suggested has a 20-year policy. This is very important with term life insurance because a 30-year policy is very close to what whole life insurance offers in terms of benefits.
Medical Exam Requirement
This one has a bit of everything. If you are young, healthy, and don’t want to take a medical exam, you may be able to get cheap life insurance from a company that specializes in this area. But price-wise, not having a medical exam isn’t always good.
Unless the company specializes in policies with no exams, you will usually pay more than if you took an exam. A big problem with policies that don’t require a medical exam is that they often don’t accept applicants over a certain age or with serious health problems. It’s nice to have, but it only helps a very small group of people.
Age Ranges Covered
Term life insurance is usually better for younger people who may need a lot of coverage at a low cost. But as you take older, especially if you’re over 50, it can become too expensive for you to do. Still, it is a good thing that term insurance is available for older people. Because of this, the age range offered by each company was an important part of each review we did.
Other Policies Offered
Even though this guide is about the best term life insurance, we’ve also thought about how other kinds of life insurance can be helpful. If for some reason, term insurance won’t meet your needs the best, being able to buy other types of insurance, especially permanent coverage, can be a big plus. For instance, even if you plan to buy a term policy, you could decide to add the whole life policy a few years later because your life has changed.