While undoubtedly a complicated process, choosing the right life insurance company to fit your needs is one of the most important decisions you will make. Among the reasons to compare different companies is that your choice will cover your funeral arrangements and other financial obligations, including tuition, mortgage, and cost of living. Permanent life policies also build cash value over time, which may provide added financial stability during your life.
The best life insurance companies are those that are financially sound, provide robust customer service, make the application process easy, and offer a wide range of features. To choose the best life insurance companies, we measured 91 insurers in these categories, collected more than 50 points of data for each insurer, and considered third-party ratings.
Read on to discover the best life insurance companies for 2022 and why each made our list.
Best Life Insurance Companies of 2022
Other Types of Life Insurance
Universal (UL)
Universal life (UL) insurance is similar to whole life insurance with a couple of important distinctions. The premiums and death benefit can be changed after the policy has been issued, and interest is credited to the cash value based on current interest rates. So you don’t know in advance how much the cash value will be worth in the future.
For this reason, universal life policies can be a way to get permanent coverage at a fixed premium that is often much lower than that of an equivalent whole life policy, at least in its early years.
Indexed Universal (IUL)
When cash value performance in a universal life policy is tied to a stock market index, it is said to be indexed. The cash value in an indexed universal life insurance (IUL) policy is credited interest based on the index selected (for example, the S&P 500 or the Nasdaq composite). It’s important to note that the cash value is not invested directly in the index.
IUL policies usually have at least a 0% floor, which means the cash value will not see a negative return even when the index performs poorly. Conversely, gains are limited as well. In fact, insurance companies are innovative when it comes to the complexity of calculations they employ to limit gains. For example, an IUL policy may be subject to one or more (usually “more”) of the following:
- Participation rate: This is the percentage of index gains that will be credited to the policy. For example, if the index returns 10% and the participation rate is 60%, 6% would be credited).
- Spread: This rate is deducted from the index’s gains. If the index returns 10% and the spread is 4%, your policy would be credited 6%.
- Cap: This limits the amount of interest your policy can be credited. If the cap is 6% and the index returns 10%, 6% will be credited to the cash value.3
IUL policies can be an attractive proposition if you want the potential for stock market gains but want to avoid losses. Just be aware that if the index doesn’t perform well enough, interest credited could be insufficient to keep up with policy expenses and your premium could increase.
Variable Universal (VUL)
In a variable universal life (VUL) insurance policy you can invest the cash value directly in the stock market. VUL policies typically offer a variety of mutual-fund-like subaccounts from which to choose; subaccounts available represent a range of investment objectives and risk profiles, from conservative to aggressive, and all can potentially lose value. This makes VUL the riskiest type of life insurance and generally inappropriate for someone who doesn’t have other life insurance coverage in place. It’s only available through an agent that is also licensed to sell securities.
Guaranteed Issue
Guaranteed issue (GI) life insurance policies are just what they sound like. Health issues will not disqualify you from approval because no health questions are asked on the application, nor is an exam required. You usually have to be at least 40 or 45 years old to be eligible for coverage, and coverage amounts are low while premiums are relatively high compared to other underwriting methods for the same amount of coverage.
GI policies are whole life policies that have a “graded benefit” for two to three years. If you die from natural causes during this time, your beneficiaries will only receive a return of the premiums you paid (usually plus a percentage like 10%). They will not receive the full death benefit unless you die after this period. After the waiting period, the policy’s full face value will be paid.
Burial Insurance (aka, Final Expense Insurance)
These policies may be either guaranteed issue or simplified issue policies. Burial insurance, also called final expense coverage, senior insurance, or funeral insurance, is a low-coverage whole life plan. While you have to answer some medical questions and coverage is not guaranteed, it can result in lower premium payments than GI.
Burial insurance, like GI, may only be available if you’re older than 40 or 45. Face values often range from $2,000 to $50,000 and policies often have a graded death benefit period before your beneficiaries are able to receive the full death benefit.
When shopping for burial insurance, be sure to compare each policy’s graded benefit period. The length of the graded benefit period can differ between companies, and some policies might not even have one. It’s also crucial to check how satisfied customers are with any company you’re considering. To make these tasks easier, check out our review of the best burial insurance companies.