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Life Insurance Guide to Policies and Companies | Healthfet

Life Insurance Guide to Policies and Companies

Life insurance is a significant industry in the US. How large? According to the American Council of Life Insurers, Americans bought new life insurance for nearly $3.3 trillion in 2020. (ACLI). According to ACLI data, this raises the total value of life insurance coverage in the U.S. to around $20.4 trillion, and there are currently close to 750 domestic life insurance companies in operation.


#1. What Is Life Insurance?

Beneficiaries are people who are selected to receive financial support from life insurance policies in the event that the insured person passes away. This payment, which is referred to as a death benefit, may be used to satisfy debts (such as mortgage payments or college tuition), pay for funeral and related costs, or replace lost income. Some policy types build up a cash value that, in certain situations, can be withdrawn or borrowed against while the insured individual is still alive.


#2. How Many Different Life Insurance Types Exist?

Term life insurance is a short-term plan, whereas permanent life insurance often lasts your entire lifetime. Both have advantages and disadvantages, and knowing the differences will help you decide which is ideal for your requirements. In addition, a lot of life insurance providers provide "riders," or extra policies, to cover particular requirements or occurrences, like long-term care, end-of-life expenses, or accidental death.


Term Life Insurance

Term life insurance offers protection for a predetermined amount of time, or term, usually between one and forty years or up to a certain age (commonly 65). As long as the insurance policy is active, the death benefit or payout sum is guaranteed. Any benefits associated with the term also expire when it does. Permanent life insurance premiums are typically substantially more expensive than term policy premiums. The policy, however, does not have an actual cash value or investment component, unlike permanent life insurance. Term insurance premiums may increase over time or remain constant for the duration of the policy.


Term life insurance comes in two different varieties:


Level-term insurance pays the same death benefit amount in the event of the insured's passing at any time while the term remains in force. According to the Insurance Information Institute, this type of term life insurance is by far the most popular (III).
Policies with decreasing terms have a death benefit that gets smaller over time.



When the initial term of some term life insurance plans expires, the insured can renew their coverage for another term, even though they would not otherwise be eligible for one. Additionally, some policies might convert to permanent life insurance.

Permanent Life Insurance

Lifetime protection is offered by permanent life insurance, and as long as payments are paid, plans will continue in force. Although they are significantly more expensive than term life insurance since they last a lifetime and accrue a cash value in addition to a death payout, policy rates typically remain constant. You can access the cash value of many permanent life insurance contracts while still alive.

The following are the main categories of permanent life insurance:


According to the III, whole life insurance plans are the most popular kind of permanent life insurance. This form of coverage has level premiums and a minimum rate of return that is ensured. Dividends from whole life insurance policies may also be paid; these can be withdrawn as income, reinvested, or applied toward premium payments.

In that they accumulate cash value over time, universal life insurance policies are comparable to whole life insurance policies. The premiums, death benefits, and rate of return can all change over the course of a person's lifetime, unlike whole life insurance.


As long as the premiums are paid, guaranteed universal life insurance guarantees a guaranteed rate of return, offering some stability for financial planning. These policies have the potential to build cash value over time, usually at a more moderate rate of return compared to other universal life insurance options.


The rate of return for index universal life insurance is correlated with a market index, such as the S&P 500. The investment component of policies typically gives the chance for higher returns based on market performance, but the "floor," or minimum rate of return, is typically guaranteed.


In that the rate of return is dependent on the success of the financial markets, variable universal life insurance is comparable to an indexed policy. The National Association of Insurance Commissioners (NAIC) reminds out that, depending on market performance, interest accrual is not always positive and occasionally may even be negative.


Final Expense Insurance

Final expense coverage, often known as burial or funeral insurance, provides a cash payout, typically up to $25,000, that can be used to settle debts or other end-of-life obligations like funeral fees.


Add-ons and Riders for Life Insurance


You might be able to change the terms of your life insurance policy by adding supplementary coverage known as a rider or add-on, depending on the type of policy you have. Typical riders include


Benefit for accidental death. If the insured person passes away before a specific age, this offers an additional death benefit. Deaths from illness are frequently not included.

Benefit for accelerated death. In the event that the insured person is identified as having a terminal disease, this rider enables them to receive a portion of their death benefits while still alive.

young rider. This rider serves as your child's life insurance policy and will pay out a death benefit if they die away while your policy is still in effect.

rider for term conversion. You can do this to change a term life insurance policy into a permanent one.

reduction in premium. In the event that a person becomes unable to work due to a disability, they can keep coverage with this add-on without being obligated to pay premiums.


#3. Best Life Insurance Companies

According to our 2022 evaluations, the best term life insurance provider is Haven Life, a digital insurance provider. Only term plans are offered by this online-only insurer, and certain candidates may not be required to undergo a medical test. It should be highlighted that MassMutual, which also produces our ratings, or one of its subsidiaries, issues Haven Life insurance.


In our ranking of the top whole life insurance providers for 2022, New York Life and Northwestern Mutual are tied for first place. Both businesses provide a variety of term life insurance policies as well as long-term cash-value-accumulating permanent insurance policies.


1. Haven Life
2. Bestow
3. New York Life
4. Northwestern Mutual
5. Lincoln Financial


#4. Cheapest Life Insurance Companies

In our rankings, Banner Life, which provides both term and universal life policies, is the least expensive life insurance provider. According to our statistics, the average monthly premium for a $1 million, 20-year term life insurance policy for a 35-year-old woman in average health is $46.63. The fact that Banner Life is one of the few insurers in our grade to provide terms of 35 and 40 years is another plus.


In our ranking of the cheapest life insurance providers, AIG is ranked No. 2. The business provides term, whole, universal, variable, and indexed universal life insurance policies. A $1 million, 20-year term life insurance policy will cost an average monthly premium of $46.91 for a 35-year-old female in good health.

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