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Best Term Life Insurance for 2021

Bankrate logo Bankrate 1/11/2021 Mark Cussen
a person standing next to a tree: Older couple walking together in a park. © Nitat Termmee/Getty Images Older couple walking together in a park.

Term life insurance can provide substantial life insurance coverage at an affordable cost, albeit for a limited period of time. Term life policies are sold by almost all major life insurance companies to provide a greater amount of protection for specific situations. Young families with small children find the low cost of term appealing, while beneficiaries can enjoy a relatively large death benefit for the money if the worst should happen.

Term life insurance is designed to provide a set amount of life insurance protection for a set period of time. This type of insurance has no savings component like permanent policies do, and the coverage from a term policy will always expire at the end of the term. Term insurance is designed primarily for younger people in good health who need a large amount of coverage to provide for their loved ones. The cost of term insurance becomes prohibitive as the insured moves into his or her later years.

Best term life insurance companies

The best term life insurance company for one person may not be the best for another, as different life insurance companies cater to various demographic segments of consumers. Some carriers focus on current and former members of the military, while others zero in on people with certain health conditions, such as diabetes or respiratory illnesses. But here we list five of the most popular and well-established life insurance companies that offer term policies to the public.

CompanyNumber of Coverage OptionsJ.D. PowerAM BestS&P
Northwestern Mutual4790 out of 1,000A++AA+
State Farm3838 out of 1,000AAA
Mutual of Omaha4789 out of 1,000A+AA-
Principal Financial3772 out of 1,000A+AA-
USAA5N/AA++AA+

The ratings provided by AM Best and Standard & Poor’s rate each carrier’s financial strength. The J.D. Power ranking is a score that rates the company’s customer service based on customer feedback.

Northwestern Mutual

This life insurance company has been insuring consumers in the U.S. for over 150 years now, and its term policies are longstanding favorites among consumers. Three of them provide renewable coverage for anywhere from 10 to 20 years, and the fourth product can be renewed on an annual basis until age 80. These plans are all also convertible to whole life insurance should the need arise.

State Farm

State Farm offers a multitude of products when it comes to term insurance, but its most unique product by far is its return of premium policy. This policy allows policyholders to pay the premiums for the policy for 20 or 30 years and then get all of their premiums back at the end of the term. This type of policy is offered until age 95, so it can cover most insureds for their entire lives. Of course, the return of premium option comes at an additional cost, so insureds need to be certain that the money will always be there to pay the premiums as the years go by.

Mutual of Omaha

This life insurance company is well-known for the plethora of additional riders that can be added to its term life policies. There is a six-month waiver of premium for insureds who become unemployed or disabled, and they can also add a rider to cover their kids. The terminal illness rider allows the insured to receive almost 95% of the death benefit up front if he or she becomes terminally ill. It should be noted that not every rider can be used with every type of policy, so consumers will need to consult with an agent in order to find out which policies and riders are right for them.

Principal Financial

This life insurance company has differentiated itself from its competition by offering term life insurance products to older consumers. While many life carriers will not offer term policies to consumers over the age of 50, Principal Financial will insure healthy consumers up to the age of 80, when they can still get a 10 year term policy. Principal Financial also offers a complete range of cash value policies, including whole life, universal life and variable universal life.

USAA

USAA is only available to military members, veterans and their immediate family. Most standard life insurance policies do not pay a death benefit if the insured dies from an act of war. USAA is the shining exception to this practice, providing specific coverage to service members while they are deployed. This coverage can be purchased on top of the group term life insurance that all members of the military can get through the government. USAA’s policies can also pay out an additional $100,000 of benefits for service members up to age 35 who marry or have children. In fact, all of the service member’s children can be added to the policy for less than an additional $8 per month.

How to find the best term life insurance company for you

There are several factors to consider when shopping for a quality term life insurance policy. The financial strength and longevity of the issuer can provide you with a good sense of a given company’s ability to pay claims. Look at a company’s financial ratings from AM Best or Standard & Poor’s to see how they are graded. In most cases, you’ll want to use a carrier that has at least an A rating. But be sure to shop around and get a series of quotes from different insurers. You may be surprised at the differences you see in price.

Frequently Asked Questions

What is the difference between term and whole life insurance?

Term insurance is designed to provide pure death benefit protection for a specific period of time, such as 20 years. When the term expires, the coverage goes away. Whole life insurance is a form of permanent insurance, where cash value accumulates inside a tax-deferred savings component that is attached to the policy. Whole life insurance is designed to remain in place for the insured’s entire life as long as the premiums are paid.

What factors impact my life insurance premium?

Your age, weight, health conditions and occupation are just some of the factors that will determine how much you pay for term insurance. The amount of coverage that you want to get is another one. If you use any form of tobacco, you can expect to pay more than those who do not. In general, the younger and healthier you are, the lower the cost of the premiums will be.

Which is better, term or permanent insurance?

There is no one right answer to this question. Term insurance usually can provide a much larger death benefit than permanent policies at a much lower price. But if you know that you’re going to need to have some life insurance at the end of your life, such as to pay for estate taxes, then a permanent policy may be the way to go. It all depends upon your financial situation and your objectives. Consult with your financial advisor or life insurance agent for more information on term vs. whole life and which is better for you.

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