Best Term Life Insurance
Based on In-Depth Reviews

Term life insurance can be easily explained. Just like the name implies, term life insurance is valid for a period of time specified in the contract between the policyholder and the providing company. The length of the term can be five, ten, twenty or even thirty years. Some companies offer renewals in five or ten-year increments.

We spoke to Melyssa Oliveras, an insurance representative with fifteen years of industry experience, about what prompts people to seek a term life insurance policy. “Usually, these policies are designed to cover a specific need, like a mortgage,” she said. “As long as you pay your premiums, you’ll be covered.”

Term life insurance has a broad appeal because of its low prices and simplicity. The younger and healthier you are, the less you will pay. Term life is so accessible, in fact, that anyone can pull up quotes online in a matter of minutes.

To put it in layman’s terms, term life insurance is “in case something happens” money. You set the term length and begin paying your premiums. If anything should happen to you during that time, the beneficiary or beneficiaries will receive the payout. If nothing happens to you and you decide not to convert or renew the policy, then no one will ever see that money. Call it having some peace of mind for a specified amount of time. If something happens, you’re covered. If nothing happens, there will be no return on your investment, except the intangible benefit of peace of mind.

We asked Barbara Friedberg, investing and personal finance expert, to define term life insurance: “[It’s] really an easy product to understand, to buy and consume. You pay a dollar amount per year or per month and that payment, if you die, entitles your beneficiary to receive the amount of the premium.”

Barbara Friedberg, investing and personal finance expert. Photo courtesy of Robo-Advisor Pros.

What Can Be Included With Your Policy

A lot of term life policy provisions are standard, so they are included at no extra cost. Extra features or riders as they’re are also known, are conditions that can be added on. While they may come at an extra cost, most riders give policyholders the benefit of more protection.

Some riders in the ‘accidental’ category will allow policyholders to receive part of their benefits while they’re still alive. If, for example, the policyholder becomes disabled or receives a terminal diagnosis, these riders will allow the policyholder to receive benefits while he or she is still alive. If the policyholder dies while the term is still in effect, the beneficiaries will receive the remainder of the policy.

Other riders serve as waivers for premium payments. If the policyholder is unable to pay, this rider allows them to continue with an active policy for an established period of time. Under different circumstances, not paying your premiums will invalidate your policy. Riders like these add an extra layer of protection for the policyholder and their beneficiaries.

The best way to determine whether you need to add a rider to your policy is to just do the numbers. Is the extra amount paid in premiums a healthy investment? Should an unfortunate accident befall you as the policyholder, will your beneficiaries be as protected as you’d like them to be?

Men and Women are Evaluated Under Different Standards

The price of any type of life insurance is determined by tables that have become industry standards. According to the Social Security Administration’s actuarial life table, men have a younger mortality rate. The reasons may vary, but in general terms, males have a tendency to succumb to illness and old age sooner than their female counterparts. Since men are more likely than women to die while the policy is in effect, insurance companies take a larger risk when insuring men--and charge higher premiums accordingly.

We asked Ms. Oliveras why men pay more for term life insurance: “Men are seen as a higher risk,” she said. “For some reason, they tend to die before women. That’s why premiums for men are higher.”

From a risk assessment point of view, it stands to reason that a higher probability of dying during the established term should result in higher premiums. 

“This can be a touchy issue for some people,” Lance Cothern, personal finance blogger told us. “The fact is that men and women are physiologically different and they have different lifespans."

Lance Cothern, personal finance blogger. Photo courtesy of MoneyManifesto.com

Downsides of Term Life Insurance Policies

The most obvious downside of term life insurance is its expiration date. Yes, you are covered according to the terms specified in your contract, but it’s only for a set period of time. Barbara Friedberg, however, doesn’t see this as a dealbreaker: “Well, it’s a cost-benefit analysis. I feel like the low price so outweighs the disadvantage of having to renew year over year, that it does not make [term life insurance] a weaker product.”

Also, there’s a little something called the contestability period that usually encompasses the first two years of a policy. If the policyholder dies during this time, the benefits may not be paid. But more on that later.

Buy Term Life Insurance Online

Some insurance companies make it possible for potential policyholders to apply online without a medical exam. You can get quotes for your policy in a matter of minutes. Not have to visit a brick and mortar office makes the whole experience much more convenient. In fact, buying insurance online can come at a more affordable price. 

Online marketplaces for insurance have become much more commonplace in the digital era. It’s very important to make sure you buy from a reputable and highly rated company. Also, some companies offer to let you chat with an agent to answer any questions you might have. However, Mr. Cothern warns that this convenience doesn’t necessarily result in better information for the potential policyholder. “The biggest disadvantage to buying online,” he said, “is that it’s harder to ask questions.”

Barbara Friedberg, on the other hand, sees an advantage in cutting out the middleman: “Insurance is a commodity product, which means buying an insurance policy is the same no matter where you buy it. If it has the same features, it’s the same. It pays out when you die.”

Accessibility is key here and online access to qualified insurance reps at zero cost might very well be the mark of a quality insurance company. That said, make sure you’re getting all the relevant information before signing up with any insurance company, online or otherwise.

Term Life Insurance and Whole Life Insurance

Premiums Are Not The Same

Whole life insurance is more expensive, period. The plus side is that because whole life policies don’t expire (unless you fail to make the premium payments), beneficiaries are just about guaranteed to receive benefits upon the policyholder’s death. Term life is more affordable because it has an expiration date and no real cash value. So you are covered during an established period, but your policy won’t last a lifetime, in contrast to whole life insurance.

We asked Mr. Cothern if he views term life insurance’s expiration date as a negative. He believes the opposite is true: “In my personal situation, [term life insurance’s expiration date] makes it a stronger product because it’s a way for me to know that I need to continue investing. So when the policy expires, I’ll still have the financial resources my family will need at that point.”

Most people sign up for term life insurance to protect their beneficiaries while they’re still depending on them as the breadwinner. This could be during the life of a mortgage or during children’s college years. If anything should happen to the policyholder while these debts are still owed, the beneficiaries will be covered.

Barbara Friedberg didn’t have any qualms about telling us how much she loves term life insurance, which she sees as a clear-cut product. “You’re paying only for insurance. So, the cost is reasonable, the fees or commissions on buying that insurance are reasonable, and you’re getting the best value for your dollar. A whole life policy usually includes an investment portion and I recommend keeping your investing separate from your insurance unless you’re a very wealthy and sophisticated person who needs to utilize specialized insurance strategies to protect a business or a very large estate.”

How Term Life Can Become Whole Life

Term life insurance is akin to renting peace of mind for an established period of time. Once that time expires, so will your policy. The convertibility of a policy depends on the terms. Some insurers allow you to change your term life into a whole life policy without having to submit yourself to insurability assessments. This can be particularly convenient for policyholders who have aged since they first took out their term life insurance. Having the ability to make the switch will help you respond to any changes in your health or home situation that will require more protection for your loved ones.

“Converting brings certain benefits,” Melyssa Oliveras told us. “You’re no longer a new policyholder so there are fewer questions. The point is to not have any period of time where you are uninsured. When the end date is coming up, we recommend policyholders have in mind what kind of policy they’d like to have going forward.”

By adding a term conversion rider to your insurance, you will be able to change from term life to whole life close to or at the end of your policy. The price of your premiums might increase but they’ll remain below the price you’d pay as a new whole life policyholder. As far as the insurance company is concerned, you are not a new policyholder, just a converted one. Once the conversion is completed, you will be covered for the remainder of your life and at the time of your death, your beneficiaries will receive the policy’s payout.

Your Benefits Can Be Forfeited

In 2018, $784 billion in life insurance claims were paid out to beneficiaries. Still, not everyone who dies as a term life insurance policyholder has their benefits paid to their beneficiary. There are a handful of legitimate reasons why an insurance company might deny a claim.

Ms. Oliveras has seen only a few of these instances. “To be honest, in life insurance, it’s very rare for a claim to be denied. The reasons I’ve seen are mostly due to unpaid premiums, people who ignored our letters sent in the mail, or simply allowed the term to expire. Claims won’t be denied, so long as the policyholder’s cause of death isn’t something that was excluded in the contract or something to do with information that wasn’t disclosed before the policy was approved. If the cause of death was included in the policy, we proceed to pay the designated beneficiaries.”

Every word in a contract is placed there for a reason. We cannot stress the importance of reading all the fine print, always considering whether the policy you are about to sign is the best for you and your beneficiaries. You may even find the experience rewarding, like this policyholder who won $10,000 for undertaking the painstaking task of reading every word of the fine print.

What Is the Contestability Period?

A contestability period usually lasts two years and if the policyholder dies during this time, the benefits may not be paid. Although the norm is two years, in some states it’s only one. The period affords insurance companies a short window of time so they may, in the event of death, investigate and contest any claim made by the beneficiaries of the policyholder. 

That’s not to say that your beneficiaries won’t be paid, it just means the insurance company will perform a rigorous examination of your application to discard the possibility of any inaccurate or withheld information. If anything, dying during the contestability period will justify a payout delay so the insurance company can perform any and all investigations they deem appropriate. 

That said, the policy can still be subject to scrutiny even if the policyholder dies after the contestability period. Again, we advise you to be truthful and avoid anything that might be remotely considered an intent to commit fraud. In the end, should you decide to engage in inappropriate behavior, the affected parties will be your beneficiaries. As Barbara Friedberg pointed out, “The consequences of not being accurate is that, if you die while the policy is in effect and the insurance company finds out you lied about any of the issues on the questionnaire, they may withhold payment of the benefit to your loved ones.”

Is Suicide Covered?

Most insurance policies have a suicide clause. Similar to the contestability period, this clause may specify that suicide will not be covered as a cause of death for the first two years of the policy. It’s also possible that the clause may exclude suicide completely, regardless of the timing of the policyholder’s death.

Claims brought forth after a suicide tend to be delicate matters, as Melyssa Oliveras told us. “These types of claims are a little more complicated because the evaluation requires reviewing police reports, filed complaints, toxicology records… These reports reveal lots of information and could result in the claim being denied. I honestly can’t make any guarantees on the matter. However, the [two-year] period will always prevail.”

Despite these and other contractual limitations, a term life policy is highly likely to pay out in the event of the policyholder’s death. According to the American Council of Life Insurers’ 2018 fact book, 99% of life insurance claims are paid out to the corresponding beneficiaries. 

Never Sign Anything Without Reading

We can’t stress the importance of reading every document in its entirety before signing. The last thing you want is for your beneficiaries to be denied their claim based on a bit of fine print information that you neglected to read. Not sure about something? Take the documents home and read them over carefully. You’ll be a better policyholder for it and your family will reap the benefits in the future.

Make sure you understand any and all scenarios that could invalidate your policy. According to Lance Cothern, this includes “high-risk activity that’s not covered by the policy. For example, if somebody has a skydiving accident and that’s something that’s against the policy, it wouldn’t pay out.”

Just because term life insurance tends to be easier to understand than whole life insurance, that’s no reason to not be thorough. We don’t mean to imply that insurance companies are out to cheat you of your hard-earned dollars, but you owe it to yourself and your loved ones to know what kind of policy you’re buying into. Also, there’s always the risk of paying for things in your policy that you don’t really need. If you simply don’t understand the product, don’t buy it. It won’t exactly become clearer over time, so why risk it? Again, read carefully--you owe yourself that much.

The Medical Exam That Qualifies You

Medical Exam? Please Explain

Most insurance companies require potential policyholders to undergo a medical exam, usually performed by a doctor or nurse. Some companies have policies that don’t require medical examinations, but they only offer limited coverage with a benefit cap. The examination is designed to get a concrete view of your health and analyze your medical history. Furthermore, the results of your exam will be compared to the information you provided to make sure there are no discrepancies.

When answering the company’s questions in regard to your health, it’s important to answer everything in the most truthful way possible. Any inaccurate or omitted information will be a liability if the policyholder should die during the term. The insurance company can use this lack of accuracy as grounds to forfeit the benefit payout.

Mr. Cothern spoke to us about the dangers of providing less than truthful data. “The problem with lying or omitting information during the interview is that the company is going to find out about it at some point and it could actually be a breach of the policy. The result is the payout not being given to your family members.”

“The medical exams can be intrusive in a sense,” Mr. Cothern added, “but what the insurance company is trying to do is price the policy so there’s no unfound risk.” After the procedure is reviewed by the company, they’ll decide whether you are insurable. If you are, depending on the amount of risk the company needs to assume, the price of your premiums will be determined.

The Reason Behind Your Exam

Some medical conditions remain dormant for years as part of your genetic heritage. Whatever the case, if your medical examination determines there’s a possibility you may die in the near future, your premiums will naturally go up. On the other hand, if the medical exam shows no reason to expect medical complications during the life of the policy, the company will set low premiums.

“The way insurance providers work with these risk evaluations is almost a science,” Melyssa Oliveras told us. “They have tables, divided by gender and age, to broadly establish a mortality rate. All prospective candidates go through this process. Depending on the answers and state of health, premiums will be determined. The healthier and younger you are, the lower your premiums will be. If you wait to get them later in life when your health may be more delicate, you will pay higher premiums because you will represent a higher risk.”

For some, signing up for term life insurance can pose certain difficulties. “It can definitely be difficult for seniors to acquire term life insurance,” Ms. Oliveras added. “As you get older, the terms will last much later into your life. The statistical likelihood of you dying is much higher than a [younger person]. It would be a lot more expensive in some cases, especially depending on your health. You may not even be able to acquire a term life policy as a senior.”

How to Avoid Results That Do Not Reflect Your Lifestyle

Once you book your medical exam, make sure to not do anything out of the ordinary that may have an adverse effect on your results. For instance, if you are a non-smoker, don’t puff on a casual cigar the night before. Blood thinners, such as aspirin or alcohol, will affect your blood analysis. Also, unusual caffeine intake before the exam will result in a reading that does not represent your normal cardiac behavior. 

For these reasons, try your best to avoid any kind of consumption that may affect your health analysis. Stay hydrated and get plenty of sleep the night before the exam. A clean bill of health will give you lower premiums. And remember, once that number is locked in, it cannot go up during the life of the policy.

Smokers Pay Higher Premiums

Higher Risk Policyholders

Smokers pay 235% more than non-smokers. Tobacco use, in the eyes of insurance companies, constitutes a large risk. Smoking is one of the main preventable causes of death, as evidenced by the long list of complications that may arise as a result, not to mention the risk of cancer. 

“We need to assess risk, so it’s important for you to be truthful when answering basic questions about your health,” Melyssa Oliveras said about evaluating smokers for term life insurance. “[As a smoker] you’re putting additional pressure on your health, so more questions automatically get added to the questionnaire. Obviously, premiums for smokers are higher than for non-smokers. Why? Because consuming nicotine is something that’s been proven to affect one’s health.”

Not only will you have to disclose your tobacco consumption on your application, but the medical exam will also surely reveal the effect that smoking had and continues to have on your body. Since you’re considered a larger risk, your higher premiums will reflect increased probability of death during the agreed-upon term.

Alternatives to Term Life Insurance

Some people go about protecting their loved ones in ways that do not involve insurance policies. Sometimes, good old fashioned savings can do the trick. While the following are alternatives to term life insurance, they aren’t necessarily more affordable. 

Ms. Friedberg is very passionate about investments, so she shared her thoughts on how people can self-insure without the aid of an insurance company. “[With] multiple streams of income, such as investing, the stock market, some real estate… you can build up enough of a net worth for you and your family that you don’t need insurance. If you die, you have assets that will continue to pay indefinitely.”

And yet, despite her enthusiasm for other sources of income, Ms. Friedberg still considers term life insurance a very strong alternative. “My bias is term life insurance is so cheap, especially when you’re young, and the cost of losing a primary breadwinner is so great that I really see no reason for young people with a family or a house not to have term life insurance.” It’s also worth pointing out that while the value of investments can go down, the payout value of a term life insurance policy will not depreciate in any way.

Mortgage Insurance

Mortgage insurance policies are designed to pay off what’s owed on a property, should the policyholder die, become incapacitated or unemployed. This kind of insurance policy makes you less of a risk to the lending financial institution. Also, a mortgage insurance policy will protect heirs from having to assume monthly payments to the lender

Funeral Insurance

Simply put, funerals are expensive. Cremation, which is projected to reach an eighty percent national rate by 2035, is usually more affordable than burial. Regardless, all procedures designed around a loved one’s death come at a cost. That’s why funeral insurance was invented, to prevent your survivors from having to dish out upwards of $7,000 to have you buried. 

Accidental Death Insurance

Accidental death insurance tends to be part of a larger life insurance policy. However, some companies also offer it as a stand-alone policy. As the name suggests, it protects beneficiaries in case the policyholder dies in an accident. In some cases, both work-related and nonwork-related accidents are covered. Some employers offer this kind of insurance to employees, but you may be able to add it as a rider to your life insurance, depending on the company issuing the policy.