Life insurance

Term and permanent life insurance explained, how underwriting works, and which companies offer it.

Companies: 16
Full profiles: 16
Comparisons: 10

The basics

How life insurance works

You pay premiums, and if you die while the policy is in force the insurer pays a death benefit to the beneficiaries you named. The benefit is generally income tax free to them, and it goes to them directly rather than through the will.

Everything else about life insurance is a variation on two questions: for how long does the promise last, and does the policy also hold money inside it. Term insurance answers the first question with a fixed number of years and the second with no. Permanent insurance lasts for life and accumulates cash value, which is why it costs considerably more for the same death benefit.

Life insurance exists to replace what your death would take away from people who depend on your income. If nobody depends on your income and you have no debts that would pass to someone else, the honest answer is often that you do not need it.

This line in the database

Companies writing this line: 1616 researched in full
Published comparisons: 10
Tools for this line: 2
Guides that apply: 5

What you are buying

What the coverages do

Each of these is priced and limited separately, so it helps to read them as separate promises rather than as one policy.

Term life: Covers a set number of years. If you outlive the term, nothing is paid and the policy ends. It buys the most death benefit per premium dollar, which is why it fits the years when children are at home or a mortgage is outstanding.
Whole life: Permanent coverage with a fixed premium and a guaranteed cash value that grows on a schedule set in the contract. Mutual insurers may also pay dividends, which are not guaranteed.
Universal life: Permanent coverage with a flexible premium. You can adjust what you pay within limits, but the policy must hold enough value to cover its own charges. Underfunding one is the usual way a permanent policy lapses unexpectedly.
Indexed and variable universal life: Universal life where the cash value is tied to a market index or invested in subaccounts you choose. The investment risk shifts to you, and variable policies are securities sold with a prospectus.
Final expense or burial insurance: A small permanent policy with simplified or guaranteed acceptance, meant to cover funeral costs. Guaranteed acceptance versions normally include a waiting period before the full benefit is payable.
Group life through an employer: Coverage your employer arranges, often with no medical questions. It is usually tied to the job, so it ends when the job does, and the amount is frequently a multiple of salary rather than an amount you chose.

Add-ons

Optional coverages you may be offered

Waiver of premium, which keeps the policy in force without payments if you become disabled.
Accelerated death benefit, which pays part of the benefit early on a terminal or chronic illness diagnosis. Often included at no extra cost.
Guaranteed insurability, which lets you buy more coverage later without new medical underwriting.
Child or spouse rider, adding a small amount of coverage for family members to your policy.
Return of premium term, which refunds premiums if you outlive the term, at a materially higher premium than plain term.
Long-term care rider, letting you draw on the death benefit for care costs, which reduces what beneficiaries receive.
Conversion privilege, which lets you convert term coverage to permanent without new underwriting. Check the deadline and which products you may convert into, because this is where term policies differ most.

Where cover stops

Common exclusions and limitations

The exclusions are where a policy is actually decided. These are the ones that come up most often on this line.

The contestability period. For a defined period after issue the insurer may investigate and rescind the policy if the application contained a material misstatement. Answering the health and lifestyle questions accurately is the single most important thing you do in the process.
Suicide within a stated initial period is generally excluded, with premiums refunded instead of the benefit paid.
Death while committing a felony, and death from an undisclosed activity such as private aviation or technical diving, may be excluded.
Graded benefit policies pay only premiums plus interest if death occurs during the initial period, not the face amount.
A universal life policy whose cash value runs out lapses, even after decades of payments, and the coverage is simply gone.
Policy illustrations for permanent products show non-guaranteed values. Only the guaranteed column is contractual.
Accidental death coverage pays only for accidental death, which is a much narrower promise than life insurance and is not a substitute for it.

Pricing inputs

What affects what you pay

01Your age at issue, which is the dominant factor.
02Health: current conditions, medication, height and weight, lab results.
03Family medical history.
04Tobacco and nicotine use, including vaping.
05Occupation and hobbies, especially aviation, diving and motorsport.
06Driving record and any criminal history.
07The death benefit amount and the term length.
08Product type, since permanent coverage costs far more than term for the same benefit.
09Riders you add.

Underwriters sort applicants into risk classes, and the class matters as much as the amount. The same person can land in different classes at different insurers, because each insurer sets its own thresholds for the conditions it sees most.

The process

How getting a quote generally works

In the order it usually happens. Nothing here is a quote, and this site does not sell one.

1
A quoted rate is an estimate for a health class you have not been assigned yet.
2
The real process is an application with detailed health and lifestyle questions, authorization for the insurer to pull your prescription history, motor vehicle record and the industry medical information exchange, and often a paramedical exam with blood and urine samples.
3
Underwriting then assigns a class and issues at that rate, at a different rate, or not at all.
4
Because the insurer verifies against those databases, an omission is more likely to produce a decline or a rescinded policy than a lower price. Answer accurately, and compare offers only after underwriting, when you know the class.

Glossary

Terminology

The words that appear on a quote or a policy for this line, in plain language.

Face amount: The death benefit stated in the policy.
Beneficiary: Who receives the benefit. Primary beneficiaries are paid first; contingent beneficiaries are paid if no primary survives. Keep this current after a marriage, divorce or birth, because the policy pays whoever is named on it, not whoever the will names.
Cash value: The amount accumulated inside a permanent policy, which you can borrow against or surrender. Any outstanding loan reduces the death benefit.
Surrender charge: What the insurer deducts if you cancel a permanent policy in its early years. It can leave the surrender value well below the premiums paid.
Risk class: The category underwriting assigns you, such as preferred, standard or substandard, which sets the rate per unit of coverage.
Level term: A term policy where the premium and the death benefit stay the same for the whole term.
Accelerated underwriting: Approval based on data the insurer can pull rather than a medical exam. Faster, and available only within certain age and coverage bands.
Free look period: A window after delivery in which you may cancel the policy for a full refund. Its length is set by state law.

Before you buy

Questions worth asking before you buy

Ask these of an agent, or of yourself, before comparing two prices.

Who actually depends on my income, and for how many more years?
Is term sufficient for that period, and what would permanent coverage add?
What risk class is this quote assuming, and what happens if I do not qualify for it?
Can this term policy be converted to permanent, until when, and into which products?
Is the premium guaranteed level for the whole term, or only initially?
Which company actually issues the policy, and what is its financial strength rating?
On a permanent policy, what do the guaranteed columns of the illustration show?
What happens if I miss a payment, and is there a grace period?
Are my beneficiary designations current, and do I need contingent beneficiaries?

Who writes it

Companies that write this insurance

Every profile is built from the company's own documentation and from regulators, with the source and the date beside each fact.

All companies

Side by side

Comparisons for this line

A pair is published only where enough fields are verified for both companies to make the comparison worth reading. No comparison names a winner.

All comparisons

Free tools

Tools for this line

Each one shows its arithmetic and its assumptions. None of them produces a premium, a quote or a savings figure.

Tool

Life insurance needs calculator

Adds up the money your household would need to replace, then subtracts what is already in place, and shows every line of the arithmetic.

Open tool

Tool

Insurance company comparison

Put two companies side by side on the facts we have verified, with the source for each one and an explicit gap where we have not verified something.

Open tool

Guides

Guides that apply here

All guides

Guide

How to read an insurance policy without reading all of it

A policy is four kinds of document stapled together. Knowing which part answers which question lets you check the things that decide a claim without reading the whole contract.

Read the guide

Guide

What insurance companies mean by an exclusion

Exclusions are not fine print bolted on to a policy. They are how coverage is defined, and there are only a few reasons any of them exist.

Read the guide

Guide

How to compare two insurance companies fairly

Most comparisons are unfair by accident, because the two things being held up against each other were never the same thing. Here is how to make them comparable first.

Read the guide

Guide

What to do when a claim is denied

A denial is a decision with a stated reason, and the reason determines what you can do about it. Work out which kind you received before you argue with anyone.

Read the guide

Guide

Why the same coverage costs different amounts for different people

Identical coverage carries different prices because insurers are not pricing the coverage. They are pricing the expected cost of the risk behind it, and that is assembled from categories of factor.

Read the guide

Go to the source