The best life insurance companies of 2020

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Life insurance company ratings

Business Insider compiled data from 20 different life insurance companies based on customer service, financial stability, and asset size rankings, along with premium prices where available. From there, we determined the top five.

Company

Financial Stability Rating (AM Best)

JD Power Customer Satisfaction (out of 5)

Sample Premium for a $250,000 policy 30-year term

1. Northwestern Mutual A++5/5n/a
2. State FarmA+5/5$30/mo
3. Guardian LifeA++4/5$30/mo
4. New York LifeA++4/5n/a
5. Nationwide A+4/5$21.44/mo

The full methodology of this ranking is listed below, under "How we determined the winners."

The best term life insurance companies

Northwestern Mutual                        

Northwestern Mutual has been around since 1857.

Pros

  • Highest rated for customer satisfaction by JD Power
  • Strong financial stability

Cons

  • Policy must be purchased through an advisor
  • No easy way to get a quote online to compare prices
  • Will likely require a medical exam

State Farm

While probably better known for auto and home insurance, State Farm also offers life insurance coverage.

Pros

  • Second place in customer satisfaction, just behind Northwestern Mutual
  • Policy purchase can be done on your own and online
  • No medical exam required
  • Discounts available for customers who have other policies with State Farm

Cons

  • Only offers 30-year terms for people under age 45

Guardian Life

The company has longevity like Northwestern Mutual. It has been around since 1860.

Pros

  • Top marks for financial security ratings from A.M. Best
  • 4 of 5 for customer satisfaction
  • Online calculator for premium quotes

Cons

  • Although you can get an online quote, you will need an agent to purchase a policy

New York Life

As the second-largest life insurance company in the US, New York Life is well-known. 

Pros

  • Top marks for financial stability
  • 4 of 5 for customer satisfaction
  • As one of the largest life insurers in the US, New York Life has policies available nationwide

Cons

  • Policies must be purchased through an agent
  • No online quotes available
  • May require a medical exam

Nationwide

Nationwide is most known for bundling its auto, homeowners, and insurance products. 

Pros

  • 4 of 5 customer satisfaction score
  • Good financial stability rating 
  • Cheapest quote for our sample premium
  • Online tool to get premium quotes

Cons

  • If you are considering switching to bundle all of your insurance products — although Nationwide's life insurance has high customer service marks — its auto insurance has low marks for customer service

What to look for in a life insurance company

Term vs whole life insurance

Life insurance protects your loved ones if you die. There are two types of life insurance: whole life and term life. 

Whole life insurance is a lifelong policy that's guaranteed to pay out eventually. But, it is about six to ten times more expensive than term life. Term life covers a person for a set number of years, and is the most affordable. 

We typically recommend term life insurance. For most people, term life insurance coverage is sufficient, and that's the policy type we focused on while compiling this list. 

How to figure out how much coverage you need

Traditionally, the rule of thumb is to get life insurance worth 10 times your annual income — so if you make $75,000 a year, you'd get $750,000 worth of coverage.

However, some experts consider that to be a low estimate, especially if you'd want your life insurance payout to cover your child's college tuition, or if you have a mortgage on your home you'd want to pay off. Some people choose to get millions in coverage.

Generally, you'll probably want to get as much life insurance as you can comfortably afford each month. If it would be a struggle to make your premium payments, it's probably too much for you.

How to find the best price

Like any other type of insurance, term life policies have many factors that influence the price you'll pay for coverage. Your age, health, location, and amount of coverage necessary will all change the monthly premium. The company you choose will look at all of these factors differently, leading to different prices for every company and each policy. 

To get the best possible deal on life insurance, you'll want to shop around and compare quotes. That may be simpler with some companies than with others, as some on this list don't offer online quotes. But when available, comparing four or five quotes to find the best deal could be an effective way to save a few dollars each month on your premium. Since you'll pay  life insurance for 20 or 3o years, that savings will add up. 

How we determined the winners

Business Insider collected data on 20 companies from S&P Global, JD Power, and the insurer's own sites. We picked our top five based on financial stability ratings, customer satisfaction, and size of the company based on market share. When available, Business Insider also gathered sample premiums. We did not include companies that no longer offer individual life insurance or did not have a minimum 3 out of 5 for customer satisfaction. 

Here are the factors we considered:

Customer satisfaction

The JD Power 2019 US Life Insurance Customer Satisfaction Survey served as the basis of this category. Using the responses of over 6,000 life insurance customers, JD Power gathered information on customer's happiness with the  application process, communications and interactions with the company, product offerings, prices, and statements. 

Financial stability ratings

Several companies and agencies rate the stability and outlook of insurance companies, including Moody's, A.M. Best, and Fitch Ratings. Business Insider gathered ratings for each life insurance company from A.M. Best. 

Size of financial assets (market share)

Business Insider obtained information on the biggest life insurance companies by market share from the National Association of Insurance Commissioners. 

Sample premiums

Sample premiums were collected when available through company websites. Each used the same sample person: a 35-year-old, single, non-smoking female living in Illinois, with the same height and weight and excellent health. These sample premiums were calculated based on a $250,000 policy with a 30-year term.  

Frequently asked questions

Why trust our recommendations?

Personal Finance Insider's mission is to help smart people make the best decisions with their money. We understand that "best" is often subjective, so in addition to highlighting the clear benefits of a financial product or account we outline the limitations, too. We spent hours comparing and contrasting the features and fine print of various products so you don't have to.

Do I need life insurance?

If you have dependents — that's people who rely on your income, like children, a non-working spouse, or aging parents you support — you need life insurance. If you don't have dependents but do have debt or own a business, you might also want to consider it.

What is the average cost of life insurance per month?

The cost of coverage varies by company, by policy, and by policyholder. A healthy 35-year old man can expect to pay about $49 per month for a 20-year term life insurance policy according to data from Policygenius.

But, many factors influence the price of life insurance. Your overall health, hobbies, gender, age, and the amount of coverage you need will affect the price you'll pay for coverage. 

Do I need term life insurance or whole life insurance?

Most people only need term life insurance, or coverage for 10 to 30 years. For families with young children, people with mortgages, or anyone with debt, this is usually the right choice. While the policy will expire eventually, it will expire after your debts are paid, and children are grown and on their own. It covers you when you have the most at stake. Generally, they cost between $20 and $40 per month, depending on your health and the age when you start.

Whole life insurance, however, works differently. This policy is significantly more expensive on a monthly basis, but is guaranteed to pay out when you die, no matter your age. While it does help protect your family from final expenses and other costs, this policy is also meant to leave a financial legacy, donate to charity, or build an inheritance for family. Whole life insurance can cost six to 10 times more per month than a term policy.

For most young families, a term life insurance policy is enough coverage to protect your family while still being affordable. If you're unsure of which type of policy best suits your family, you might want to consult a financial planner.

How do I get life insurance?

There are a few ways to approach getting life insurance once you've decided how much coverage and what type of policy you need. 

You can find policies through these insurers, or through online agencies, which are backed by major insurance companies. Online agencies let you bypass the need for an in-person insurance agent, and often offer the ability to get a quote and buy your own policy entirely online. 

If you want to go the more traditional route, you can work with an agent. With some of the companies above, like Northwestern Mutual, you'll need to work with an agent to get a policy. Companies will generally either help to connect you with an agent or provide a list of agents in your area. 

If you're working with a company that doesn't require an agent, you can go ahead with the application process yourself. After completing some questions about your health history, hobbies, and travel plans, you may be asked to complete a medical exam. If so, you may make arrangements with a paramedical examiner to meet you at your home. However, some companies are changing their medical exam policies due to COVID-19. Talk with your prospective insurer to arrange an exam you're comfortable with. 

After completing these steps and being approved by the insurer, you'll get your final monthly payment. From there, you'll start paying for your policy and have your coverage in place. 

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

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