When you find out you’re about to become parents for the first time, there’s a laundry list of things that you might find yourself obsessing over. You want to get the right diapers for sensitive skin, and that won’t leak, you’ll pore over reviews about the right bottles that won’t cause gas, and you might research pediatricians to find the ideal doctor for your little one.
However, there’s one item that may not occur to you to put right up near the top of your to-do list, and that is to get the right life insurance policy.
Of course, when you’re contemplating the joy that bringing a new life into the world will bring and all the excitement and emotions that come with having a baby, it might seem kind of morbid to think about life insurance policies. However, it goes hand in hand with everything else that you’re doing to take care of your child.
Similar to how you would pay a car insurance company to cover you in the event of an accident, a life insurance policy would provide a benefit to your named beneficiary if you were to lose your life.
Life insurance works to help cover the loss of your income and alleviate any financial burdens that your dependents may face in the event of your death by paying out what’s called a “death benefit.”
There are two primary types of life insurance policies that you can select from, term or permanent.
With term life insurance, the insurance company can issue a policy that can last 10, 20, or 30 years with set premiums during that time frame. If your death occurs within the years that the policy exists, then your beneficiary receives the benefit. If you’re still alive by the time the term expires, no one gets paid anything, except the company that received your payments for all those years.
Permanent life insurance is a little more complicated because it lasts for your whole life and pays a benefit whether you die a year after you purchased the policy or 50 years later. Also, there are different kinds of permanent life insurance: whole, variable, and universal are some of the most popular.
With permanent life insurance, you make an investment, also known as the “cash value,” that grows over time. Permanent life insurance is an excellent choice for someone who wants to accumulate cash along with the death benefit versus a flat payout amount like term life.
Although you might buy a life insurance policy with your child in mind, you should name an adult, such as your spouse, as your beneficiary. If you don’t have a spouse that can use the death benefit for your child, then you can arrange to name an adult custodian for the money through the Uniform Transfers to Minors Act or UTMA.
Through the UTMA, in most states, you select an adult you trust who would handle the life insurance payment while your child is a minor. You could also consult with an attorney to set up a trust for your child and have the trust as the beneficiary of the life insurance policy. The adult you leave in charge to manage the money would be the trustee, and you can even specify how the money should be spent.
After doing all the legwork of selecting the right policy and taking all the steps to ensure your family is taken care of in the event of your death, you have one final task, and that is to alert your beneficiary about the policy’s existence and provide them with copies of the paperwork. Don’t expect your insurance company to pay out if no one makes a claim.
Honesty is important to us, so we like to share how we compiled our information. To come up with our unbiased “best of” list, we researched industry news and publications, looked at customer satisfaction statistics and complaints, the life insurance company’s financial strength and reputation, and ease of obtaining a quote.
The price you’ll pay on premiums for a life insurance policy can vary widely and depend on several factors such as:
Image source: State Farm
State Farm’s history dates back to 1922 so if you choose to buy a life insurance policy from them, you’ll have the peace of mind of knowing that you’ve selected a well-established company.
Through State Farm’s online life insurance policy, you can use their calculator to determine how much coverage you need or how much your plan should pay out. They offer a variety of policies including term, universal, and whole life insurance.
For term life insurance, they offer coverage periods of 10, 20, and 30 years that pay out benefits starting at $100,000. In their sample pricing information, State Farm shows that a 10-year plan with a $250,000 benefit can cost as little as $15 a month for healthy 25-year old’s and you can continue to renew your plan until you turn 95.
Your family can use the term life benefits to help pay for short-term debts and mortgage or tuition payments. State Farm also offers a Return of Premium term life insurance where your premiums are returned at the end of the coverage period if you outlive the 20 to 30-year term.
Depending on your age, sex, and health, State Farm’s whole life insurance policy option can provide $100,000 in benefits for monthly payments of around $75.
State Farm also has three different whole life policies:
If you and your spouse want to get a joint life insurance policy, State Farm offers a survivorship universal life insurance option that covers two people, and the beneficiary receives the death benefit when both parties are deceased. They also have joint universal life insurance for two people that pays the benefit if one of the insured parties passes away.
In 2018, J.D. Power and Associates ranked State Farm as number one in overall customer satisfaction with the company scoring 825 points out of J.D. Power’s 1000-point criteria which makes it one of the best life insurance companies.
Also, according to the National Association of Insurance Commissioners, State Farm Life Insurance had a complaint ratio of 0.27 in 2018 which was much less than the national median of 2.17.
State Farm also has an “A” rating with the Better Business Bureau and an “AA” rating with Standard & Poor’s which shows that State Farm meets its financial commitments because you don’t want to give your money to a company that might not be around years later when you might need the insurance to pay the benefit.
Image source: Northwestern Mutual
Northwestern Mutual has been around for over 150 years and offers a variety of financial services like retirement planning, estate planning, college savings, and life insurance. They have products that include term life, whole life, and universal life policies. Policyholders own the company, and when Northwestern does well, some policyholders receive dividends.
Some of Northwestern Mutual’s term life insurance products have premiums that they guarantee won’t ever increase, might provide dividend payments and financial benefits for your beneficiaries. With term life plans, you can select coverage for 10 or 20 years or until you turn a certain age.
When the term expires, your coverage does as well, but Northwestern gives you the choice of changing your term life insurance to a permanent policy. If you decide to switch your Northwestern policy from term to permanent, you don’t have to undergo any medical examinations, and you’re guaranteed acceptance.
If you select permanent life insurance, your policy gains tax-deferred equity while you pay your premiums and you can use it as collateral, cash in a portion of the value, or take a loan against it.
With Northwestern Mutual’s whole life insurance, after years of premium payments and building up the cash value, besides the death benefit for your beneficiaries, you can also use your contract to enjoy certain benefits while you’re alive like:
Similar to whole life insurance, Northwestern Mutual’s universal life option builds cash value and covers you for your whole life. The premiums are flexible, but how much you pay for your premiums affects the cash value produced by the policy. You can select your payment schedule, or you can choose a single premium plan that lets you pay in one lump sum.
Their online portal has a calculator to let you estimate how much coverage you and your family might need.
In 2018, Northwestern Mutual had a complaint ratio of 0.08 compared to the national median complaints about life insurance companies which was 2.17, so far fewer grievances were filed against the company that many others across the United States.
Northwestern’s complaint ratio is the lowest of any of the companies reviewed on this list and is a strong indication that most policyholders were satisfied with their insurance policies and service.
Northwestern Mutual ranked in second place for J.D. Power’s 2018 overall customer satisfaction study for life insurance. Standard and Poor rated Northwestern “AA+” for financial strength, and they have an “A+” rating with the Better Business Bureau.
Image source: Nationwide
Nationwide started as an automotive insurance company, but over 85 years, it has expanded its services to include banking, investment and retirement planning, and multiple kinds of insurance, including life insurance.
Nationwide’s website has a tool to help you calculate how much insurance you need and which of the plans that they offer could be the right one for you and your family. You can choose from term, whole, universal, or variable life policies.
Nationwide’s term life policies cover periods of 10, 15, 20, or 30 years with premiums that don’t change or fluctuate for the duration of the coverage. You can continue to renew the contract until you’re 95 years old and the death benefit received by the beneficiaries is income-tax free. Nationwide does also offer the option of converting a term life product to a permanent insurance option.
If you’re interested in the universal policies, you can choose a fixed premium plan where your payments stay the same, but you can’t amend the plan should something in your life change. Otherwise, Nationwide also offers flexible universal life insurance that allows you to modify how much coverage you want and control the payment schedule.
With universal life insurance, the policy’s cash value earns tax-deferred interest, and you have access to the cash value when needed. With Nationwide’s whole life insurance, the amount you pay for your premiums stays the same for as long as the contract exists, and the plan gains a fixed amount of interest which allows you to grow the cash value.
A variable universal life insurance policy does more than potentially pay out a death benefit because it also provides you with investment options to assist you in growing the policy’s cash value.
J.D. Power and Associates ranked Nationwide in third place in 2018 for overall customer satisfaction in their life insurance study. Standard and Poor’s rated Nationwide with an “A+” which means that they have strong financial security but not as strong a rating as State Farm or Northwestern Mutual.
The Better Business Bureau graded Nationwide with an “A+.” According to the National Association of Insurance Commissioners, the number of complaints filed about Nationwide’s Life Insurance Company falls well below the national average indicating that customers are satisfied with the service.
Image source: Mutual of Omaha
You might recognize the name Mutual of Omaha from their association with the Wild Kingdom television program on Animal Planet, but the history of Mutual of Omaha dates back to 1909. The company began with accident and health insurance in Nebraska, and since then, they have expanded their services across the nation to include financial services and life insurance.
For term life insurance, you can select policies with coverage periods of 10, 15, 20, or 30 years. You are eligible to set up a term plan if you are between the ages of 18 and 80 and the minimum benefit that you can choose is for $100,000.
If you outlive your term life policy, you can continue to renew in annual installments until you reach age 94. Depending on your age and the benefit amount needed, Mutual of Omaha might require a medical examination to determine if they will issue a policy.
For a whole life insurance plan, your coverage is guaranteed, and no medical examination is necessary. You should be between the ages of 45 and 85 and the benefit amounts range between $2,000 to $25,000.
With Mutual of Omaha’s whole life policy, if the person covered by the insurance dies from natural causes during the two years since the policy was issued, the beneficiary receives any premiums paid by the insured and an additional 10 percent.
If the insured party dies two years or more after they bought the insurance, then the beneficiary receives the death benefit whether the death was from natural causes or an accident.
With Mutual of Omaha’s universal life insurance, you have the flexibility of increasing or decreasing your coverage amount, and they have different plans that allow you to focus on either guaranteeing a death benefit or using your life insurance policy to build up cash value.
Growing the cash value of your universal life insurance plan lets you draw loans against it or use it for emergencies, retirement funds, or as an additional source for college tuition money. Like the term life insurance plans, Mutual of Omaha may require your medical history or a medical examination before issuing a universal life insurance policy.
In 2018, J.D. Power and Associates ranked Mutual of Omaha in fifth place in their life insurance study of overall customer satisfaction with the company meeting 792 points on J.D. Power’s 1000-point scale. Mutual also has an “A+” grade with the Better Business Bureau.
Mutual of Omaha has a financial strength rating of “AA-“ with Standard and Poor’s, so they actually rank slightly higher than Nationwide Insurance. However, in 2018, their complaint ratio was at 0.56, which means they had more complaints filed than Nationwide or Northwestern Mutual. They were still well below the national median complaint index.
Image source: Haven Life
If you think the options available under whole life insurance are not for you, and you find yourself most interested in purchasing a term life insurance policy that can last until your child is an adult and hopefully able to take care of themselves, then you might be interested in Haven Life Insurance.
Haven Life only offers term life insurance policies, so these plans don’t build up a cash value to borrow against or possibly use for emergency retirement funds. You can get a quote on their website, and there may be cases where they won’t require a medical exam before finalizing the policy.
Although undergoing a medical exam for insurance purposes might seem like a bit of a hassle, it’s the best way to determine the right price for a plan tailor-made for you. With Haven Life, you can select terms of 10, 15, 20, or 30 years and you can choose benefit amounts between $100,000 up to $3 million.
If you’re between the ages of 60 and 64, the maximum benefit you can apply for is $1 million. Also, you have the option of renewing your contract annually after the term has expired. The company does not offer joint insurance policies, so each of you would have to apply for individual policies since you can’t add your partner or spouse to the plan.
With Haven term life insurance policies, your premium payments stay the same for the length of your coverage.
Haven Life offers additional riders you can add to your term life insurance like an Accelerated Death Benefit that gives you access to some of your policy’s benefit if you are diagnosed with a terminal illness and only have 12 to 24 months left to live. You can use that money for coverage of medical expenses or any other needs, but the funds that you withdraw are taken away from the death benefit.
The company also guarantees to allow you to renew your plan at the end of its term, even if you are terminally ill. Your premium will probably go up, but you won’t end up without life insurance.
Haven Life offers a waiver of premium rider that allows the insured not to pay premiums if they become disabled for six months or less. If the disability lasts more than six months, then the insured gets a refund since the date they became disabled. Haven Life Plus is another rider offered by the Haven term life policy that provides the insured with certain benefits.
With Haven Life Plus, you can use their online Trust & Will solution to help you draw up a legal will or trust, and LifeSite which is an online safe deposit box to digitally organize your family’s life documents. Unfortunately, Haven Life Plus is not available for policyholders in Washington, North or South Dakota, New York, or Florida.
Massachusetts Mutual Life Insurance Company, also known as MassMutual, owns Haven Life. J.D. Power and Associates included MassMutual in their top 10 for overall customer satisfaction for life insurance.
Standard and Poor’s gives MassMutual a financial strength rating of “AA+” and the company has a “B” rating with the Better Business Bureau. According to the National Association of Insurance Commissioners, MassMutual’s complaint ratio index was 0.12 in 2018 which was far below the national median of 2.17 and is the second lowest on our “best of” list.
Image source: New York Life
New York Life has almost 175 years of experience in retirement planning, investments, estate planning, and life insurance. They are a mutual company that answers to its policy owners and not Wall Street investors, so when they do well, so do the policyholders. For the past 164 years, they have paid dividends to eligible policy owners, and they rank as one of the companies with the most financial strength.
New York Life offers two different term life policy options:
With both plans, you can convert your term insurance to a permanent one.
New York Life lets you add future coverage for your spouse so that if you pass away, your spouse can use some of the benefits to obtain a policy from the company without requiring a medical examination.
With the Disability Waiver of Premium, New York Life will pay for your premiums if you become disabled. Also, if you have a terminal illness, you can use part of your benefit to cover medical expenses using the Living Benefits rider.
With New York Life’s whole life insurance policy, they guarantee that your premiums won’t increase so that can alleviate some stress by knowing that your payments stay the same no matter your age. The cash value of the policy can build over time and is tax-deferred which lets you use it if you need to buy a new home or want to use it for income when you retire.
You can customize your whole life insurance contract to focus on either the death benefit for your family or growing the cash value and the associated benefits. New York Life has different whole life plans that you can choose that might be better choices for you depending on certain factors like if you’re close to retirement age, want to balance the death benefit and cash value or want to grow the cash value as much and as quickly as possible.
If you’re more interested in maximizing the death benefit and less interested in growing your policy’s cash value, like if you’re an older parent, then the universal life insurance could be the plan for you.You can choose from a hands-on option that allows you to customize your premiums and benefits as your circumstances change, or you can pick a set it and forget it one where you pay the same amount for as long as you’re covered.
A variable universal life insurance policy lets you invest the cash value of the plan, which of course introduces some risk. You can choose how you’d like to invest, or you can work with New York Life’s financial experts to explore options.
You can add a Guaranteed Minimum Accumulation Benefit rider to your variable universal life contract that ensures your return rate won’t go under a certain point if the market crashes. However, adding the Guarantee rider does limit your investment choices.
In 2018, J.D. Power and Associates ranked New York Life in sixth place for overall customer satisfaction in their U.S. Life Insurance Study. New York Life earned one point less than Mutual of Omaha on J.D. Power’s 1000-point scale.
Standard and Poor’s financial strength rating of New York Life is “AA+” which puts them on equal footing with Northwestern Mutual and Haven Life. The Better Business Bureau gave New York Life a grade of “A+” and the company’s complaint ratio for 2018 was 0.30 which was well below the national median of 2.17 but is higher than Northwestern Mutual and Haven Life.
Typically, in this section, we’d give a final opinion as to which of the companies is the best option. However, given that so many personal factors come into play for obtaining a life insurance policy quote, there’s no realistically impartial way to narrow it down. What could be a great quote using our personal information could yield completely different results for you.
As you’ve probably noticed by reading this article, life insurance can be at once simple and complicated. It’s simple because life insurance, like automotive or health insurance, mostly does one thing and that is to have your family’s back during a time of need.
However, it’s complicated because you can also choose to use your life insurance policy to generate cash and through investments, grow its value if you’re interested in using it for more than just the death benefit like for additional retirement funds.
Ultimately, all of the companies that we reviewed in this guide have long histories of financial strength. None are startups where you could potentially risk the money you invest in your premiums and all employ experts that could answer all your questions to help you further narrow down your selection to the right one.
By choosing any of the life insurance providers on this list, you’re taking the necessary measures to ensure and protect your growing family’s financial future.
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