Research done by Life Insurance Marketing and Research Association shows that half of the U.S population have inadequate life insurance as they should. Another independent study conducted by employee providers indicates that a third of U.S households will experience financial strain within the first month after the breadwinner’s demise. Some people shy away from shopping for life insurance, fearing that it costs lots of money; however, you may be shocked to realize that it cost less than you think. A report by Insurance Information Institute (III) demonstrated that life insurance is five times cheaper than most people think.
If you are lost in the hay of advertisements on what suits your life insurance needs, don’t worry. We intend to make your shopping process as easy as possible through thorough research and rating top insurance companies for you. This article evaluates some companies scoring them on performance factors such as customer service and financial strength.
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Types of Life Insurance – Best Life Insurance Companies of 2024
Having the correct information is key in any decision-making, including shopping for life insurance. Life insurance has several sub-categories; however, life insurance has two main types: Term Life Insurance and Permanent Life Insurance.
Term Life Insurance
It is also called pure life insurance, which is life insurance that promises to pay a stated sum of money, death benefits to your loved ones should the covered person die during the specified term. If the term expires, the policyholder has several options. They can convert the policy to permanent coverage, renew the policy for another specified term, or allow the policy to terminate.
How Term Life Insurance Works
The insurance company calculates the premium basing this calculation on the pay-out amount, health, age, and gender. The company can also order a medical test, examine driving records, smoking status, family history, hobbies, current medication, and occupation to determine the premium.
If you die during the term policy, the insurance company will pay the beneficiaries an equivalent of the policy face value. You can use the amount to settle your healthcare cost, debts, mortgage, or funeral cost. However, if this policy expires when you are alive, there is no pay-out. You can renew the policy with a recalculated premium based on your current age. Term life insurance policies lack the saving nature of whole life insurance products.
[Related Read: What is Term Life Insurance, and Why Do I Need It?]
Advantages of Term Life Insurance
- It is cheaper than permanent life insurance, meaning you pay smaller fees and receive little benefits.
- Next, it allows you to pay premiums for a set period, not in your lifetime.
- Also, it’s convertible to a permanent insurance life policy, which means you can choose it when you have limited cash and upgrade to permanent when your economic situation improves.
The Downside of Term Life Insurance
- It does not have any cash value. It means that the money you are paying is a death benefit receivable by your loved ones once you are dead. Permanent life insurance outweighs term life insurance in this area since you are guaranteed more than the death benefit.
- Should the expiry of term life insurance precede your death, your family will miss out on the pay-out unless you renew or shift to permanent life insurance.
- Several people choose term life insurance because it is cheaper and because the family will get the needed money for expenses. As one grows older, their need for life insurance diminishes, since by then, they would have paid many pending bills such as a mortgage, car loan, and children’s education.
Permanent Life insurance
Permanent life insurance is an insurance policy involving the payment of a premium for a lifetime. It combines the death benefit offered by term life insurance with savings. It is categorized into two whole life insurance and universal life insurance.
Whole Life Insurance
It provides coverage for a person’s whole life until their death with savings that grow at a certain rate.
Benefits of Whole Life Insurance.
- It is not restricted by time, as in the case of term life insurance.
- It provides cash value. Part of the premium you pay is deposited into investment accounts that accrue interest.
- The cash value can be used to guarantee a loan; you can withdraw part of the money for personal use or pay premiums without needing an outside source. Additionally, the cash value you receive is tax-deferred.
Disadvantages of Whole Life Insurance
- It is relatively expensive than term life insurance since the insured must pay a premium for a longer period. Therefore, this type of insurance is best for those with better financial freedom. If your finances are limited, for now, you can stick with term life insurance.
- A whole life insurance policy requires that you pay a certain fee should you opt for early use of cash value. This amount varies from one company to another.
- Should you pass without utilizing the accumulated cash value, your family will only get death benefits and lose the cash value taken back by the company. Ouch! That sting.
Universal Life Insurance
It differs from whole life insurance in three areas: you can change the premium payment frequency, the premium amount can change with time, and the insured death benefits can change.
This type of permanent life insurance can befit those who believe their financial situation will likely change before death. Moreover, the policy allows you to update it without needing a new policy. It also allows the insured to make any changes to the policy as they so wish without a new plan. However, in addition to the downsides of whole life insurance, this policy has numerous variables, making it intimidating and confusing.
The Four Best Life Insurance Companies of 2024
Different life insurance companies are good at different things; hence there is no magical choice of one insurance company best for everyone. This paper explores a simple methodology to help you get started in your decision-making. I have used three established comparison factors, including financial strength, customer satisfaction, and premium.
1. Northwestern Mutual
This insurance company boasts over 160 years of experience offering various traditional coverage on life insurance and financial services. The AM Best financial strength ratings gave the company a rating of A++, meaning the company is financially stable. The J.D. Power ratings gave it a score of 812/1000 on customer satisfaction, ranking as better than most. Their premium is relatively low and is known to be the best in whole life insurance with several add-ons.
2. State Farm
State Farm is also an experienced player with nearly 100 years in the industry, offering a variety of insurance policies in addition to universal, term, and whole life insurance. It offers major discounts for customers shopping for multiple policies. The AM Best financial strength ratings gave the company a rating of A++, meaning the company is financially superior. The J.D. Power ratings gave it a score of 831/1000 on customer satisfaction, ranking as “among the best.”
3. Mutual Omaha
The Nebraska-based insurance company has over 100 years of experience and is praised for its whole life policy with no medical examination. The company offers insurance, mutual funds, and banking services to individuals, businesses, and groups. It has a lower age limit of buying burial insurance at 45, five years earlier than other companies. Therefore, it ranks top in providing burial insurance. The AM Best financial strength ratings accord the company a rating of A+, meaning the company is financially superior and stable. The J.D. Power ratings scored the company at 792/1000 on customer satisfaction, ranking better than most.
4. Voya Financial
This company offers ideal group life insurance plans for different size companies. It provides both whole life insurance and term life insurance coverage and does not necessarily need a medical examination before buying a policy. It is also ideal for people in a family with a cancer history. The AM Best financial strength ratings accord the company a rating of A, meaning the company is known to be financially excellent. The J.D. Power ratings scored the company at 744/1000 on customer satisfaction, ranking better than most.
Shopping for life insurance is an important decision that can benefit your dear ones if you are not around them in the future. You can operate with peace of mind knowing that your financial future and that of your family are guaranteed. You can choose term life insurance, whole life insurance, or universal life insurance, depending on your circumstances and financial ability. In all, you can find a comprehensive list and reviews of the best life insurance companies of 2024 on various rating websites.