Most of us like to think we will always remain young and invincible. Unfortunately, nobody can predict the future and if your family will struggle financially if you can’t be there for them.
Having one of the best term life insurance policies can give your family the peace of mind you’re seeking.
For many adults, term life insurance is the only way they can afford life insurance. While these policies only last between 10 and 30 years and don’t earn cash value, the monthly premiums for whole life can easily be ten times higher. For example, your monthly term life premium can be $20 and a similar whole life policy can be $200.
Table of Contents
- Who Should Get Term Life Insurance?
- The Best Term Life Insurance Companies
- 1. Ethos
- 2. Haven Life
- 3. Bestow
- 4. Policygenius
- 5. JRC Insurance Group
- 6. John Hancock
- 7. Prudential
- 8. Phoenix Life Insurance Company
- 9. Legal and General America
- 10. GEICO
- 11. Protective
- 12. Assurity
- 13. Fidelity Life
- 14. MassMutual
- 15. Foresters Financial
- 16. Principal
- 17. AIG
- 18. Midland National
- 19. Brighthouse Financial
- 20. Transamerica
- 21. Mutual of Omaha
- 22. Sagicor
- 23. Americo
- 24. USAA
- 25. Northwestern Mutual
- 26. Guardian Life
- 27. Gerber Life
- 28. Nationwide
- 29. American National
- 30. Thrivent
- 31. AXA
- 32. Lincoln Financial
- 33. New York Life
- 34. Primerica
- 35. MetLife
- Term Life Insurance FAQS
- What is Term Life Insurance?
- How Much Life Insurance Is Enough?
- How Long Should Term Life Insurance Be?
- Is Term Life Insurance Expensive?
- Should I Get a Convertible Term Life Insurance Policy?
- What Are Level Payments?
- Does Term Life Insurance Build Cash Value?
- Can I Use Term Life Insurance To Pay Bills?
- Are Life Insurance Benefits Taxable?
- What Are Life Insurance Riders?
- Can Children Get Term Life Insurance?
- Why I Have Term Life Insurance
Who Should Get Term Life Insurance?
Probably the most asked life insurance question is to get term or whole life insurance. Many financial pundits, including Dave Ramsey, will advise you to get term life insurance and immediately run away from anybody trying to sell you whole or universal life insurance.
Most agents are most likely recommending the more expensive types of life insurance policies so they can earn a higher commission. This is a brutal assessment, but it’s accurate more often than you realize.
Your ultimate goal should be becoming financially independent and skip life insurance altogether. By becoming “self-insured,” you have the equivalent balance in your savings account of your current life insurance policy.
For example, you have $200,000 in the bank when your current life insurance policy is for $200,000. The only problem is that you might not reach this financial milestone until you’re ready to retire. Until then, term life insurance policy is an affordable way to achieve financial security.
You should consider term life insurance for the following reasons:
- Don’t have enough money to cover the average funeral cost of $10,000
- Your debts exceed your current life savings (i.e., you’re not self-insured)
- You don’t want your spouse or children to worry about money
- Cover expensive medical bills without going into debt
- Want a policy separate from your workplace benefits
- Term life insurance is cheaper than you think!
Term life insurance pays tax-free death benefits that can be used for some of the following expenses:
- Funeral costs
- Medical bills
- Replace income
If you “can’t afford to die,” you’re a prime candidate for term life insurance. For less than $30 a month, you can secure a financial lifeline for your family. And, it only takes a few minutes to start the process!
The Best Term Life Insurance Companies
Is life insurance important? Yes. If it wasn’t, your bank wouldn’t send you a life insurance advertisement in the bank at least once a month. Instead of getting a policy from the first life insurance company you come across, perform your due diligence. You want to make sure you get the most coverage at the lowest possible cost.
Some companies even offer life insurance without a medical exam. If you don’t want blood drawn or spending time going to the doctor, these companies can be an automatic shoe-in. Even if you don’t need a medical exam, you will still need to answer the multiple health-related questions during your underwriting interview and may need an exam if you have a special health condition.
Ethos provides term life insurance in 49 states in 10 to 30-year terms up to $1 million in coverage. In fact, Ethos is one of the few companies that make the word “No” actually sound appealing because they cut through the red tape:
- No medical exam required
- No pushy salespeople or upselling
Applications only take 10 minutes to complete and claims are paid within two weeks.
Even though Ethos is a relatively young company, they are underwritten by several legendary insurance giants. For example, two of their insurance partners are Assurity and Munich RE which have been in business for 127 and 137 years, respectively.
Very few businesses can say they have been around for an entire century!
Although the entire application process takes 10 minutes, you can get a quote in a few seconds. Ethos offers term life insurance to the following applicants:
- Between 18 and 75 years old
- U.S. citizen or green card holder
- Lived within the United States for at least 24 months
During the application process, Ethos considers your physical and financial health to help determine your monthly quote.
2. Haven Life
With Haven Life, most applicants younger than 45 years won’t need a medical exam! Haven Life is also backed by MassMutual, a 160-year-old insurer.
You can get an instant quote through Haven Life’s InstantTerm feature for an immediate decision once you answer a few personal health questions.
Coverage amounts vary between $100,000 and $2 million and this makes Haven Life a better option if you need a high coverage amount. Once your current term expires, you can automatically renew your policy without additional underwriting, but you’ll pay the current rates based on your age at the time of renewal.
A unique Haven Life feature is their accelerated death benefit. If you or another Haven Life policyholder are diagnosed with a terminal illness, you can qualify for early withdrawals to help cover expensive medical bills.
Another reason to consider Haven Life is free access to their LifeLink app which lets you send your location to the first responders. Because 70% of 911 calls are made with a mobile device, you might get routed to the wrong 911 operator if you’re outside your local coverage area.
According to their website, Bestow “is on a mission to make term life insurance simpler and more human.”
They make it easy to apply for life insurance in minutes. All you have to do is apply online, enter some of your personal information, and you’ll get a response right away. This makes it easy to apply even if you have a busy schedule.
You don’t have to make a doctor’s appointment in order to apply. Instead, Bestow calculates risk using the data you enter when you apply for coverage.
They offer plans as short as 2 years with up to $500,000 worth of coverage. These short term plans start as low as $3 per month!
If you’re looking for longer-term coverage, they also offer 10 and 20 year terms with up to $1 million in coverage. These plans start at $8 per month.
If you like to comparison shop, Policygenius provides quotes from several life insurance companies at once so you can find the lowest price within five minutes.
What makes Policygenius different than the other life insurance companies on this list is they are an independent insurance broker. They don’t provide life insurance but earn a commission if you select one of their recommendations.
Because insurance premiums are regulated by your state government, you won’t pay more if you enroll through Policygenius instead of directly through the insurance provider.
Just like you try to sell your products on multiple online marketplaces to reach different audiences and increase the odds of making a sale, life insurance companies partner with Policygenius for the same reason.
For additional peace of mind, Policygenius only partners with the best life insurance companies that meet the following criteria:
- Good reputation
- Sound financial ratings
- Offer online quotes
Policygenius won’t sell your information to third parties for financial gain. And, they won’t recommend one insurance company more than another to earn a higher commission.
5. JRC Insurance Group
JRC Insurance makes comparing life insurance quotes easy. Their fee-free, online tool helps you compare 50 top-rate companies, plus their agents can help you narrow down choices even further based on your specific needs.
Plus, if you have health issues, the tool will anonymously compare your health profile to each company’s guidelines to see which ones you may still qualify for.
Policies can have a 10, 15, 20, 25, or 30 year term. There are also permanent policies available.
6. John Hancock
John Hancock is a prestigious name in the insurance and investment world. Their Vitality Program can shave 15% off your annual premium when you pursue healthy behaviors. So it really does pay to workout.
Some of the perks include:
- Up to $600 discount on healthy food
- Earn an Apple Watch with an initial payment of $25 or a free FitBit device
- Discounts at retail and travel partners
It’s possible to qualify for up to $1 million coverage without a medical exam! You can get an instant quote in one minute, so it’s worth checking out John Hancock if you’re active and want to earn healthy rewards.
Smokers and tobacco users are virtually guaranteed to have higher premiums than their non-smoker peers. If you use chewing tobacco, Prudential is one of the best life insurance companies for tobacco users.
You might also prefer using Prudential because they are a household name that might even provide your workplace benefits. In the past year, Prudential has earned the top position in the insurance category with Fortune and Forbes magazine for being one of the best companies in the world!
With these accolades, it comes as no surprise that Prudential is the second largest life insurer in the United States.
Tip: Even if you’re a current tobacco user, being tobacco-free for 12 months can help you qualify for a lower rate on life insurance. For additional health incentives, you might also consider using HealthyWage to lose weight and improve your vital readings. Having stellar medical exam results means you’ll qualify for the lowest monthly premiums.
8. Phoenix Life Insurance Company
Phoenix Life has been around since 1851 and offers a Safe Harbor Term Life product. You can get four living benefit riders that offer additional coverage for these unexpected events:
- Critical illness
- Chronic illness
- Terminal illness
These riders are already included in your monthly premium. Phoenix Life is also a no medical exam company with quick underwriting decisions, so they are worth considering if you are in good health and want to avoid the exam.
9. Legal and General America
Term life insurance is offered Legal and General America in 49 states plus the District of Columbia. New York residents will have their life insurance underwritten by William Penn, Banner’s wholly-owned subsidiary.
People with “average health” might consider them because they tend to offer lower premiums if you’re not a model of perfect health. Because they are more lenient, you will need to take a medical exam to complete the application process. However, select applicants between the ages of 20 and 50 can qualify for a no medical exam policy.
You might like Legal and General America term life policy if your parent has ever been diagnosed with cancer. During the underwriting interview process, many life insurance agencies will ask you a litany of questions about your personal medical history and your immediate family.
If one of your parents has been diagnosed with an illness like cancer, your quote can also increase. The odds of that happening are lower with Banner.
Tobacco users should also consider them because they offer lenient tobacco user premiums too. It’s possible to get the best non-smoker rates if you’ve been tobacco-free for at least three years! Other life insurance companies might not offer their best rates until you’re tobacco-free for at least five years.
Despite their flexible underwriting standards, they have an A+ Superior financial strength rating from A.M. Best and an AA- rating (Very Strong) from S&P and Fitch. As the world’s 9th largest insurance company, you don’t have to worry about giving your money to a risky company.
GEICO is best known for their car insurance, but they also offer term life insurance. You might be able to avoid a medical exam if you apply for a term up to $250,000.
When you request an online quote, GEICO will show you the most affordable quote from “A” rated companies for a 10, 15, 20, 25, or 30-year term. I ran a quick quote and Banner or Protective were the two most affordable options in my case. The results might be different for you and it’s an easy way to comparison shop.
Maybe you’ve never heard of Protective, but they have been providing insurance for over 100 years and sound financial ratings. You can also get a terminal illness rider with your policy too. You can get a term life policy ranging between $100,000 and $50 million (with an m) with a 10 to a 30-year term.
Protective advertises rates that are 49% less than the competition, so you might be able to save some cash if you think you’re currently overpaying for life insurance.
You might already be familiar with Assurity because they also underwrite the term life insurance policies for Ethos. Since 1890, Assurity has been providing insurance products. Assurity’s Non-Med Term 350 provides $350,000 in coverage to applicants between the ages of 18 and 65 years old.
13. Fidelity Life
Choosing the Fidelity Life RAPIDecision Express offers an exam-free term life policy for terms up to 30 years. This life insurance plan is available until you turn 95 years old.
Once your term expires, you can continue to keep your Fidelity Life policy but your premiums will increase each year until you turn age 94. If you still qualify for a new term policy when your current policy expires, you should get a new policy to lock-in a flat rate for the next 20 years.
Optional riders include dependent child and accidental death. These riders can also be more affordable than getting a separate policy for the same coverages.
MassMutual offers term life insurance coverage for the following insurance combinations:
- Just yourself
- You and your spouse
- Yourself, your spouse, and children
Although you can get a longer term, MassMutual recommends getting either a 10 or 20-year term to secure the best rate. MassMutual also underwrites every Haven Life term life insurance policy so you should get identical quotes from both companies.
One advantage of going with MassMutual is that you can also use them for retirement and investing your money as well.
It’s also possible to get free life insurance through the MassMutual LifeBridge program that offers a 10-year, $50,000 term to parents and legal guardians that make less than $40,000 annually. Since this program’s inception in 2002, MassMutual has paid $680 million in LifeBridge insurance premiums! If the insured parent passes away, the children can use the money to pay for educational expenses.
15. Foresters Financial
Foresters will donate 1% of your life insurance payout to your charity of choice. This benefit counts as a charitable deduction in your name and can help reduce the estate tax amount for your heirs. You can also select a no medical exam Your Term policy. Applicants up to age 80 can apply for life insurance from Foresters.
Some of the additional complimentary insurance riders include:
- Common carrier accidental death rider
- Family health benefit rider
- Accelerated death benefit rider
Many no exam life insurance companies don’t require a medical exam if you have a small insurance policy, sometimes as small as $30,000. Principal is one of the few life insurance companies to offer a $1 million no exam life insurance policy!
To be forthright, Principal does have stricter underwriting standards than other life insurance companies so not everybody will get the exam requirement waived. If you’re in good health, it’s worth a try getting a quote from Principal.
Principal doesn’t have the largest name recognition, but they have been in the insurance industry since 1879 and are a Fortune 500 company today.
They also have an A+ and AA- rating which are the 5th and 4th highest of 20 financial ratings. These ratings are consistent with many of the best life insurance companies and Principal is a safe place to open a policy.
AIG is one of the largest insurance companies you’ll come across. While most life insurance companies offer a maximum 30-year term, you can get a 35-year term with AIG.
Your premiums will be higher but you might be able to save money long term because you pay the same monthly amount when you’re 54 as when you were 20.
You will need to get a medical exam with AIG, but your policy is backed by a company that has been around for nearly a century and has a presence in over 80 countries.
18. Midland National
Midland National has the reputation for being a low-cost term life insurance provider. You can obtain an instant online quote and see Midland’s four different rate categories based on the following criteria:
- Smoker vs. Non-Smoker
- Blood pressure
If your cholesterol is below 220 and you don’t smoke, you stand the best chance of qualifying for the lowest premiums with their non-smoker Preferred Plus rate.
19. Brighthouse Financial
An offshoot of MetLife, Brighthouse Financial offer term life policies up to 30 years in duration. The minimum policy amount for term life insurance is $1 million so you may need a high net worth to qualify. Also, you can only apply for a Brighthouse life insurance policy through a financial advisor.
If you qualify for one of their life insurance policies, you should have no regrets. Current Brighthouse clients report reasonable premiums and the peace of mind that comes with a highly trusted brand.
San Francisco residents are familiar with the iconic Transamerica building in the city skyline, and they also offer a solid term life insurance product too. No medical exam policies are currently offered up to $249,999 in coverage.
Transamerica offers two different term life insurance products:
- Trendsetter Super
- Trendsetter LB
With the Trendsetter Super plan, you have the option to convert your term plan of up to $1 million to a permanent plan when your current term finishes. Although permanent policies earn cash value will premiums will be notably higher, so it might be in your best interest to avoid this plan.
For many, the better option is choosing the Trendsetter LB plan instead so you can qualify for living benefits and up to $2 million in coverage. Some of the living benefits are accelerated death benefits for chronic, critical, and terminal illnesses.
If your beneficiaries need to collect your death benefits, they can select a lump sum payment or monthly installments.
21. Mutual of Omaha
When you buy a Mutual of Omaha life insurance policy online, you can avoid a medical exam and get coverage up to $100,000. This is a perfect amount if you only want enough coverage to cover funeral expenses and replace your salary for one or two years.
You will need to speak to an actual Mutual of Omaha agent if you want a policy greater than $100,000. Your policy can remain in effect until age 80 and you can apply for a policy up to age 74.
You might consider Sagicor for no exam term life insurance too. A Sage Term is available for 10, 15, or 20 years.
Two of the living benefits include terminal illness or nursing home confinement for early withdrawal benefits. Sagicor is available in 45 states and the District of Columbia. AM Best also gives Sagicor an A- financial rating which is the 4th best on a 16-point scale.
International residents can also get a policy from one of the international Sagicor companies too. Sagicor has been in business since 1840 and is one of the oldest insurance companies in the world.
Americo is another highly rated life insurance company and it’s one of the largest privately held companies too. They have also been offering insurance solutions since 1906.
Ever since then, Americo and its acquired subsidiaries have been life insurance pioneers as they were the first American life insurance company to insure children in 1922.
Today, Americo life insurance policies with no medical exam are offered up to $250,000 in coverage for 20 and 30-year terms. Americo also has an “A” rating (Excellent) which is the third-highest rating possible.
Military members are already well familiar with USAA and their many banking and insurance products. If you or a loved one is currently on active duty, you can enjoy these two additional benefits:
- $25,000 severe injury coverage
- Up to $400,000 in additional coverage once you leave the military and your SGLI benefits lapse
If you want to add children to your policy as add-on riders, USAA only charges an additional $7 a month for all of your children. Other insurance companies might charge up to $5 a month for each child, meaning two children cost an extra $10 a month.
USAA also extends an automatic $100,000 coverage upgrade when you experience a major life event including marriage or having a child. Your premiums will increase, but you don’t have to go through the entire underwriting process again.
You might also get a multi-product discount if you have another insurance product with USAA too, like car insurance or homeowner’s insurance.
25. Northwestern Mutual
College sports fans will recognize Northwestern Mutual from their tv commercials with its tall Corinthian pillar logo.
Just as these pillars from the ancient world still stand today, the 160-year-old Northwestern Mutual has the highest financial rating possible of A++. If doing business with a financially sound company is important to you, you should strongly consider Northwestern Mutual.
Besides the superior credit rating, Northwestern Mutual also has one of the best customer satisfaction ratings with minimal customer complaints and a high J.D. Power customer satisfaction score.
The one downside is that Northwestern Mutual’s term life insurance costs more than many other recommendations on this list. But, you might think of it as having the Mercedes or BMW in the insurance worlds instead of a Ford or Chevy.
26. Guardian Life
Guardian Life has been around since 1860. The world has changed a lot since then and a Superior rating with A.M. Best company. Yes, Guardian is one of the other privileged insurance companies to have the highest financial ratings possible.
With Guardian, you can get term life coverage in 10, 25, 20, or 30-year terms. The minimum coverage amount you can apply for is $250,000 and the maximum is $5 million. Guardian also offers a coverage waiver if you become disabled for at least six consecutive months.
27. Gerber Life
Maybe you’re familiar with Gerber Life because of their commercials for children’s life insurance. Although you can also buy whole life policies for your child, you can also get a term insurance policy for yourself.
Your premium can be as low as $8 a month. No medical exam is required if you’re between the ages of 18 and 50 and you apply for a coverage amount up to $100,000.
Gerber Life also offers term life insurance for seniors too. Applicants up to age 60 can get a 20-year policy and applicants up to age 70 can get a 10-year policy.
Nationwide offers a YourLife Guaranteed Level Term policy that lets you add these additional riders:
- Accelerated death benefit for terminal illness
- Children’s term
- Premium waiver
- Spouse rider
The children’s term rider offers an additional benefit for each child until they turn 22 years old or get married, whichever occurs first.
Nationwide offers term insurance for up to 30 years. You have the option to carry life insurance up to age 95 with Nationwide.
29. American National
Founded in 1905, American National has offices in all 50 states and Puerto Rico. The vision of their founder was to follow business practices so the country will still be in business 500 years later. Just think, Europeans had just discovered the New World 500 years ago!
It’s possible to get approved within 15 minutes for a no medical exam policy up to $250,000. If you choose, you can also add optional living benefits to your policy.
American National has had an “A” rating or better with A.M. Best since 1941. For your peace of mind, you will want to stick with an insurance company that only has an “A” rating or better as it means the company is financially sound.
Thrivent is a Christian-centered organization offering term life insurance and several other financial products. One reason to consider Thrivent is their Live Generously initiative.
By forming an Action Team, Thrivent will donate $250 to help you support a local community cause. If your monthly premium is $25, the $250 seed money essentially offsets your premium for 10 months and your favorite charity gets some additional support.
Some life insurance companies don’t support your charity until your death benefits pay out. While this $250 contribution won’t be made in your name, you can at least see the fruits of your labor which can be more rewarding!
AXA is one of the largest insurance companies in the world and they offer term life insurance. They have an elite A+ (Superior) financial rating and started offering life insurance a few years ago in 1859.
You will want to consider their BrightLife Term policy which features several living benefits riders. There are two additional term life options available that can convert into a permanent life policy, but you will want to avoid these policies to save money and have access to living benefit riders. You will need to talk to a financial professional to begin the application process.
32. Lincoln Financial
As one of America’s 250 largest companies, Lincoln Financial offers two different term life insurance products:
- Lincoln Term Accel
- Lincoln Life Elements
With the Lincoln Term Accel, applicants under the age of the 50 can get a no exam policy for policy face amounts less than $500,000. It’s possible to get coverage within two business days without a medical exam! You will pay the same premium for the entire term and optional riders are available. The minimum face amount for a Term Accel policy is $100,000.
If you want continued coverage when you get older, you can opt for the Lincoln LifeElements plan. Once your term policy finishes, you can continue receiving coverage. However, your coverage amount will decrease and your premiums will increase each year. You might prefer a LifeElements plan when you need at least $250,000 in coverage.
33. New York Life
New York Life is another respected life insurance company, but you can’t get online quotes. Their Simplified Term Life Insurance program offers no medical exam coverage up to $100,000 for people between the ages of 30 and 74 years.
You can purchase fixed premium amounts for either 10 or 20-year terms. Although you don’t have as many options as other life insurance companies, the 10 and 20-year terms are the most popular and affordable premiums for many.
As a whole, New York Life tends to charge more for life insurance than other companies mentioned on this list.
Primerica has only been offering term life insurance since 1977, but they are only one of the 17% of companies that have the highest A+ rating possible from A.M. Best.
You can’t get online quotes, but you can add optional riders to enhance your overall policy. If you want a terminal illness rider, you can withdraw up to 70% of your policy or $400,000, whichever is less.
Because you can’t get online quotes from Primerica, do take the time to compare premium costs with other life insurance companies at the same time. Some people report Primerica having above average premium costs compared to others on this list.
The other recommendations on this list are for personal term life insurance that you apply for in your free time. MetLife only offers term life insurance through employer-sponsored plans.
If your current employer doesn’t offer life insurance, ask your Employee Benefits Director to consider offering workplace life insurance. You will lose coverage if you leave your job, but it can be an affordable way to get a second life insurance policy in addition to a standalone life insurance policy you own.
Term Life Insurance FAQS
Many of us don’t put much thought into term life insurance because it’s “out of sight and out of mind.” People tell us it’s important to get life insurance, and too many people get a policy without understanding how term life insurance works. While term life insurance is really simple–you only have to pay your premium each month to keep your coverage active–not every life insurance plan is the same.
These questions and answers can help you so you make the right decision the first time and don’t overpay.
What is Term Life Insurance?
A dictionary definition of life insurance is “insurance that pays out either on the death of the insured person or after a set period of time.”
You might think of term life insurance as paying rent and whole life insurance is like buying a house where you build equity. With term life, you don’t get any money back at the end of the policy term–10, 15, 20 years from now–unless you die (which we don’t want to happen).
How Much Life Insurance Is Enough?
The second most popular life insurance question is determining how much life insurance you need.
The general rule of thumb is 10x your current salary. If you make $50,000 a year, your total coverage amount will be $500,000 if you follow the 10x rule. Depending on your financial circumstances, you might opt for less coverage to have smaller monthly payments that you can afford. Remember, some coverage is better than no coverage at all.
If you have a high debt balance or other large expenses coming up during the policy term like buying a house or putting your child through college, you might choose to get more than 12x your annual salary for instance.
The best term life insurance companies offer free quotes, so take the extra few seconds to get a quote for a few different policy amounts to see how much coverage you can actually afford.
How Long Should Term Life Insurance Be?
Most life insurance companies offer policy terms for the following durations:
- 10 years
- 15 years
- 20 years
- 25 years
- 30 years
The three most popular options are 10, 15, and 20-year terms. Once you get above the 20-year term, the monthly premium rapidly rises. Most people don’t want to spend this much at once because each spouse might need to get a policy.
Getting the longest term possible locks in your rate for a longer time. When it’s time to renew your policy, you’ll pay the rates based on your current age. So, a 20-year policy for a 20-year-old by nature costs less than a 20-year policy for a 40-year-old.
Is Term Life Insurance Expensive?
Because most term life insurance premiums cost $30 or less, you should have no problem paying your monthly bills and having life insurance.
To give you an example, I got an instant quote for term and whole life insurance for $250,000 coverage:
- 10-year term: $16 per month
- 15-year-term: $20 per month
- 20-year term: $24 per month
- 25-year term: $27 per month
- 30-year term: $31 per month
- Lifetime (Whole life insurance): $105 per month
A 20-year term is a quarter the price of a whole life insurance policy. Each month, you spend $81 less on term insurance or $972 a year. If you have a limited income, you might not have an extra $1,000 to spend each year on life insurance.
Term insurance is a perfect option for adults because it’s so affordable. If you have to pay $24 a month, you can easily pay the premium by going out to eat one less sit-down restaurant dinner each month.
Follow these tips to save more money every month.
Should I Get a Convertible Term Life Insurance Policy?
Only you can make this decision, but insurance companies like to offer “convertible” policies that turn your term life insurance policy into a permanent (whole) life policy when your term expires. Although our financial needs change with age, you are probably better off financially by not converting your policy as your new term life insurance rates should be cheaper if you’re in good health.
What Are Level Payments?
Level payments is a fancy way of saying you pay the same amount each month for your life insurance premium. If you get a 10-year policy with a $15 monthly premium. You will pay a “level” $15 premium every month for the full 10 years.
Does Term Life Insurance Build Cash Value?
No. Term life insurance policies don’t build a cash value like whole life insurance. If you end up outliving your term life policy, you don’t get any of your premium payments back. It’s the same concept as medical insurance, car insurance, or phone insurance when you don’t file a claim.
With whole life, you can withdraw the “cash value” of your policy before you die. There are several different versions of whole or permanent insurance so your cash value can be a different amount for each policy.
While you might think having a cash value is important, keep in mind that your monthly premiums are significantly higher. In most cases, your best option is getting a term life insurance policy which costs $30 or less per month and either investing the difference or putting it in a money market account.
Never view life insurance as an investment. For most people, the potential rewards do not justify the cost.
Can I Use Term Life Insurance To Pay Bills?
Life insurance companies might say you can use term life insurance to pay off your mortgage, student loans, and other bills. What you need to keep in mind is that you don’t get this money until the policyholder passes away.
If your policy has living benefit riders, you might be able to make an accelerated death benefit for terminal illnesses. You may have to pay a small withdrawal fee or a higher monthly premium to have this benefit option.
Also, most life insurance companies only let you withdraw a portion of the policy amount. Some companies let you withdraw the entire amount, but most cap the withdrawal limit between 25% and 75% of the policy amount.
Are Life Insurance Benefits Taxable?
In nearly every case, life insurance benefits aren’t taxable for the beneficiary. If your spouse is your beneficiary for your $250,000, they will receive the $250,000 payment tax-free.
Life insurance benefits can be subject to the estate tax, but most households don’t need to worry about this tax under the current code.
What Are Life Insurance Riders?
It’s common for life insurance companies to offer add-ons called “riders.” Some companies offer these riders for free, but others charge an additional monthly fee.
One of the most common riders is accelerated death benefits for terminal illness. You can withdraw a portion of the policy amount while you’re still alive to cover expensive medical bills.
Another popular rider is a child insurance rider. Instead of getting a separate life insurance policy for your child, you can get additional coverage for your child. This rider might be free, but many companies charge a small monthly fee for each child.
Can Children Get Term Life Insurance?
Insurance companies only issue term life insurance to adults. In most cases, you need to be at least 18 years old before you can apply.
If you want to insure your children, you can consider adding a rider to your policy. Whole life insurance policies are also very reasonable for minors too. For roughly $6 a month, you can get a whole life insurance policy that covers the cost of a funeral and burial. Your child can continue to make payments on this policy for their entire adult life too without an increase in premiums.
Why I Have Term Life Insurance
I’m proud to say my wife and I both have term life insurance. We got our policies three years ago when I changed careers. My previous employer provided term life insurance as a free employer benefit, but that coverage vanished when I turned in my two weeks notice letter.
At that time, we had a newborn baby and a home mortgage. Our life savings couldn’t pay our bills and support my wife during the transition if the worst was to happen to me.
So, we each got a 20-year term life policy and we both pay approximately $15 each month. Our term life coverage is enough to pay off our mortgage balance and replaces our annual salary for a short time. This way, my wife doesn’t have to hurry to find a job to make ends meet and find a babysitter for our two children.
While I plan on outliving our 20-year term, I know that my term life insurance policy benefits won’t force her to make hasty decisions if the unthinkable happens. For us, it’s well worht the peace of mind.
The best term life insurance companies will offer you the most affordable plan without upselling you with more expensive life insurance products you don’t need. Term life insurance is an affordable way for the average person to make sure their family has enough money to pay the bills if the worst happens. Getting your policy as soon as possible helps guarantee you pay the lowest rate and are protected sooner instead of later.