Choosing the Best Life Insurance Company

Before diving in and purchasing life insurance, it is vital to understand exactly what features to look for when comparing the best life insurance companies. There are various types of life insurance that are designed to fit a wide variety of needs. Moreover, some providers offer customizable policies with added provisions known as “riders,” which can add valuable benefits.

Learn more about the top life insurance companies

Types of Life Insurance

If you are scratching your head wondering, “What is life insurance?" Don't worry. It's not as complicated as it sounds. Life insurance ensures that your spouse and children — or any other individuals who rely on your financial support — are covered when you pass away.

There are two main types of life insurance: Whole Life and Term Life. Term life insurance policies provide protection for fixed periods of time. For example, 10-, 20- and 30-year term policies at guaranteed rates. Whole life insurance has higher monthly premiums and covers you for the extent of your life or until age 120, whichever comes first.

What is whole life insurance?

Whole life insurance, or permanent life insurance, covers the policyholder for their entire life. The policy pays out to a specified beneficiary when the policyholder dies, and accrues extra cash value over time. Premiums for whole life plans are fixed, are based on the age of the applicant at the time the policy is opened, and are usually higher than term life premiums due to policyholder coverage for a longer period of time.The advantages that come along with whole life insurance are well-suited to the needs someone may experience over a long life. A primary feature of whole life policies is the ability to benefit financially. Many established providers pay dividends that are a nice yearly bonus based on performance, and policyholders can employ the cash value of their policy in several ways that help them deal with financial or medical needs that may arise.

There are several forms of whole life insurance policies. In short, you’ll want to consider what your goals are for having this policy and, then, select a type of whole life insurance that fits your needs. Here’s a look at the most common forms.

Traditional Whole Life

With traditional whole life, the premium and the amount of the benefit paid at the end of your death are designed to remain level throughout your lifetime. That means, if your costs rise by a certain amount, the debt benefit rises by the same amount. That does mean it gets a bit more expensive when you get older.

Universal or Adjustable Life

With universal or adjustable life, you have more control. You can increase the amount of the benefit if you decide to do so. There’s also a secondary component, called the savings vehicle. With each dollar you invest, a portion of those funds are likely to go into an account that earns money for you to access during your lifetime. For example, as that amount grows due to good performance in the market, you may be able to adjust your premiums to be lower as it will pull some of those funds from the account.

Indexed Universal Life (IUL)

An IUL is similar to a regular universal life policy in that the  interest rate of an IUL will be variable, and there is also a minimum interest rate that your IUL policy will always earn, regardless of market performance. 

Rather than choosing between a traditional whole or term life insurance policy, an IUL policy takes a portion of a policyholder’s premium payments toward an annual renewable term life insurance policy, while the rest of the payment gets added to the cash value of the policy (after fees are deducted). This cash value is invested into an equity index account (think the S&P 500 or NASDAQ). By investing in an index fund, an IUL policy allows you to grow your policy’s cash value based on the index of an entire market sector. Monthly or annually (depending on your policy), this cash value is credited with interest based on increases in an equity index.

Variable Life

Variable life insurance policies offer even more investment opportunities. With them, the underlying investments can be bonds, money market accounts or stocks. There’s more risk with these policies.

Some forms of whole life insurance can work as a way for you to save for your retirement years. For example, in whole life insurance policies that offer a savings vehicle, such as variable and universal life, a portion of your payment goes toward the fees for having the account. Another portion covers the benefit. And, that third chunk goes into savings. As the value grows, you may be able to withdraw some of those funds during your retirement years. In this way, the policy works a bit more like a 401k account. It still offers a benefit at the time of death, too.

The benefits of whole life policies are numerous:

• If you pass a health screening, you can purchase as much coverage as you need.
• Purchasing a whole life policy at a young age can mean very cost-effective coverage for your needs over a lifetime.
• They can help you to earn an investment income during your retirement—though costs and risks should still be considered by anyone choosing these policies.

Who will benefit the most from whole life insurance?

• Individuals who are younger and healthy.
• Those who want to purchase a policy that gives them back money during their lifetime.
• Those who are looking for permanent protection.
• Those who wish to leave behind the benefit for specific goals, such as funding an estate plan or covering a loved one’s college education.

Don’t Just Rely on Group or Employer Life Insurance

But what about life insurance provided by an employer? If your company offers free life insurance, then sign up for this free benefit — but don't stop there. Many companies offer their employees a certain amount of insurance for free, but this is usually not enough.

Usually, you can purchase supplemental insurance through your company's benefits, but this insurance does not travel with you if you move jobs — unless your company allows you to pay an expensive premium price to take your policy with you. So, if you want to fill in any gaps in coverage and make sure you can take that coverage with you if you change jobs, an individual term life policy might be worth checking out.

How Much Coverage Do I Need?

It can be daunting to figure this out but evaluate your current financial situation today, and what foreseeable expenses will need to be covered 10 to 20 years down the road. 

When deciding how much coverage to purchase, ask yourself these questions:

How long do I need coverage? If you just got married and are starting a family, you will need at least 20 years of coverage to ensure that your children are provided for until graduation.

How much can I afford? Find the balance between buying enough coverage and having a monthly premium that fits in your budget. The more coverage you purchase, the more expensive your premium (the amount you pay) will be.

What will my family need if I pass away today? If something were to happen to you today, there would be a lot of financial expenses placed on your family's shoulders. 

Whether you choose term or whole life insurance depends on your current and future financial needs. Either one is essential to have, especially if you have loved ones who rely on you for financial stability. 

Underwriting

The underwriting process when applying for term life insurance can be significantly longer and more involved than other types of insurance. This is because companies take greater care—for example, medical examinations—to limit their exposure to risk, due to the level of funding that goes into death benefits. 

Getting the right life insurance policy can give you and your family peace of mind should your circumstances take a turn for the worse. As this is a very important decision that could affect the future of your family, it’s important to compare all the best life insurance companies available and choose the one that best suits your needs. 

* Rate based on female, age 50, $5,000 in coverage

** The total amount of all AGL Guaranteed Issue Whole Life Insurance policies on any person cannot exceed $25,000 in the aggregate.