How does term life insurance work?

Term life insurance is a type of life insurance that offers coverage for a set period of time, or term. Term life is usually the most affordable type of life insurance because it only lasts for a specific number of years, usually 10 to 30 years. Unless you buy return-of-premium life insurance, you receive nothing back if you outlive the term. However, many term life insurance policies offer the option to convert to a permanent life insurance policy at the end of the term. Many carriers also provide the option to renew a term life policy annually if you still need coverage past the expiration date.

What is the difference between term and whole life insurance?

Term insurance is designed to provide a death benefit if the insured passes away within the length of the policy term. As the name suggests, term life insurance remains active for a predetermined “term,” which is the window of time that the policyholder chooses, typically between 10 and 30 years. When the term expires, the policyholder stops paying the premiums and the death benefit will no longer be paid out. Whole life insurance is a form of permanent insurance that includes a cash value account that accumulates interest or returns. Whole life insurance is designed to remain in place for the insured’s entire life, as long as the premiums are paid.

What factors impact my life insurance premium?

Your age, gender, weight, health conditions and occupation are just some of the underwriting rating factors that will determine how much you pay for term insurance. The amount of coverage that you want to purchase is another key factor in determining your cost for life insurance. Insurers consider multiple aspects of your lifestyle to set premiums. For example, the use of tobacco usually leads to higher premiums as a reflection of associated health risks. In general, the younger and healthier you are, the lower the cost of the premiums will be. Learn more: Cheapest life insurance companies

Does having a preexisting condition impact my ability to purchase term life insurance?

Yes, having a preexisting condition may impact your ability to purchase term life insurance. Different conditions may be considered more or less serious by different insurers. If a life insurance provider does approve you for a term life policy with a preexisting condition, your premium may be high to reflect the health risks. Insurance providers may be more likely to approve you if you have conditions that can be managed. For instance, if you have Type 2 diabetes and maintain a healthy lifestyle, you may be more likely to be approved for term life insurance. If you have a preexisting condition, speaking with a licensed insurance agent may help you navigate your life insurance options.

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Best term life insurance for 2023

Written by

Mandy Sleight

Edited by

Amelia Buckley

Reviewed by

Kenneth Chavis IV

Updated Mar 20, 2023

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Term life insurance policies remain active for a set period of time, usually between 10 and 30 years, and are typically much cheaper than permanent life insurance policies. Individuals often choose to take out a term life insurance policy to cover a period of time in which they have certain financial obligations, such as when their children are young or when their mortgage is in effect.

If you’re looking for the best term life insurance policy for your needs and budget, you may want to start by researching the companies we outline below. Through an objective analysis of each company’s policy options and third-party rankings, Bankrate’s insurance editorial team determined State Farm, Mutual of Omaha, Northwestern Mutual, Pacific Life and Guardian Life to be among the best life insurance companies for term coverage.

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Whole life insurance combines life insurance with an investment component.

Coverage for life
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3 variations of permanent insurance: whole life, universal life and variable life include investment component

Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.

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Best term life insurance companies

The best term life insurance companies depend on an individual’s needs and preferences. While your quoted premium will typically not vary as much as for life quotes as home or auto insurance, different companies do offer different coverage types and levels. We chose the following companies based on their third-party financial strength and J.D. Power customer satisfaction scores, as well as the policy options and available coverage capacities (the maximum dollar amount a policy can be). It may be helpful to start your research with the following providers:

Company	Best for…	J.D. Power score	AM Best	S&P
State Farm	Excellent customer service ratings	839/1,000	A++ (Superior)	AA
Mutual of Omaha	Easy online quoting for term policies	801/1,000	A+ (Superior)	A+
Northwestern Mutual	Digital tool availability	794/1,000	A++ (Superior)	AA+
Pacific Life	High potential coverage limits	793/1,000	A+ (Superior)	AA-
Guardian Life	Policy customization	787/1,000	A++ (Superior)	AA+

The ratings provided by AM Best and Standard & Poor’s (S&P) grade each carrier’s financial strength. These ratings indicate each company’s historic ability to pay out claims. The J.D. Power scores reflect customer satisfaction based on policyholder feedback to help you see which companies may be most popular with their policyholders.

State Farm

Why we chose it: State Farm has the highest J.D. Power score for customer satisfaction on our list.

State Farm won our 2023 Bankrate Award for best term life insurance provider thanks to its superior AM Best score and near-nationwide availability. State Farm offers several term insurance products, but its return-of-premium policy option may be particularly helpful for certain term life insurance policyholders. This option lets policyholders choose between a 20- or 30-year payment term and receive a portion of their premiums back if they outlive the term. The return-of-premium policy can be renewed annually until age 95. While the return-of-premium option comes at an additional cost, it also builds cash value, which is rare in a term life insurance policy.

Learn more: State Farm Insurance review

Mutual of Omaha

Why we chose it: Mutual of Omaha offers easy online quoting for its term life insurance policies and a wide array of riders for potential policy customization.

If you want to get an idea of how much term life insurance might cost, Mutual of Omaha offers a term life insurance quote tool online. Enter your gender, date of birth, tobacco usage and coverage amount to get a rate. Mutual of Omaha offers a plethora of additional riders that can be added to its term life policies. It should be noted that not every rider can be used with every type of policy. To verify how much coverage you need and which riders can be added to your policy, you may want to consult with an agent. This company also offers a locator service to help you find a financial advisor near you.

Learn more: Mutual of Omaha Insurance review

Northwestern Mutual

Why we chose it: Northwestern Mutual offers a wide array of informational resources and policy management tools online.

Northwestern Mutual is the largest life insurer in the U.S. by direct premiums written and has been insuring consumers for more than 150 years. The company's term policies allow you to select your coverage period based on either a set amount of years or until a specific age, depending on which option is most suitable for you. These plans are all also convertible to whole life insurance, meaning you may be able to adjust your policy as your needs evolve. Northwestern Mutual’s A++ (Superior) financial strength rating from AM Best is the highest level available. However, the company only offers one term life insurance rider, so if you want greater policy customization, it may not be the carrier for you.

Learn more: Northwestern Mutual Insurance review

Pacific Life

Why we chose it: Pacific Life has term life insurance policy options with high coverage levels.

Those wanting to tailor their term life insurance with riders may wish to consider Pacific Life for term life insurance. The carrier offers two policy options, both of which are convertible to cash value life insurance. Its Promise Term policy offers a minimum amount of $50,000 in coverage, while the Elite Term starts at $750,000 and goes to $3 million or more. Available riders include waiver of premium for disability, terminal illness and child term rider.

Learn more: Pacific Life Insurance Review

Guardian

Why we chose it: Guardian life insurance offers four different term lengths and a long list of potential riders.

Guardian's term life insurance policies are available in four term lengths. The carrier also has a long list of riders for potential policy customization, including a guaranteed renewability clause in the event that you are diagnosed with a serious illness. However, be aware that the company does not offer a network of local agents, so if you prefer to handle your insurance needs face-to-face, you may not be satisfied with the level of service.

Learn more: Guardian Insurance review

How to find the best term life insurance company for you

There are several factors to consider when shopping for a quality term life insurance policy. Since your life insurance will ultimately be responsible for providing the coverage you want for your family, these considerations may be beneficial to keep in mind when determining which provider is right for you. In addition to policy types, you could consider:

Consider customer satisfaction scores and financial strength ratings

Customer satisfaction scores may provide insight for consumers looking to purchase insurance products. These scores reflect how satisfied existing customers may be with the customer service and claims process. You might use these scores to get an idea of how your customer experience could be and which carrier might best fit your expectations.

A life insurance company’s financial strength score reflects its past ability to pay out claims and could help you decide if a company is financially sound. Third-party agencies such as AM Best and S&P publish financial strength scores for each major provider.

Consider your personal situation

Term life insurance remains active for only a set number of years. To decide whether term life insurance is right for you, it may be helpful to consider what you want coverage for. Do you simply want coverage while your children are young, or would you prefer lifelong coverage?

While term life insurance may be sufficient for temporary needs, like ensuring you could pay off debt and finance college for your kids if you were to pass away, it may not be the right choice if you want coverage for longer. If you need coverage for final expenses or to take care of a lifelong dependent, permanent life insurance may be a better choice. There are several options to choose from, including:

Whole life insurance: Whole life offers level premiums and a guaranteed death benefit for life. It also builds cash value over time, which you may be able to access through withdrawals or loans.
Universal life insurance: Similar to whole life, universal life offers permanent coverage with more flexibility. You can increase or decrease premium payments or the death benefit if life circumstances change.
Final expense life insurance: If you only need a small amount of coverage or have serious health issues, final expense life insurance may be your best option. It works like whole life, but doesn’t require a medical exam. Some policies are guaranteed issue, meaning there is no medical exam or health questions on the application.

Compare multiple quotes

Getting quotes for different types and levels of coverage may help you get an idea of how much you’ll pay for your life insurance. However, keep in mind that term life insurance quotes for the same person and policy type likely won’t vary as much from company to company as auto insurance or home insurance quotes do.

Frequently asked questions

Term life insurance is a type of life insurance that offers coverage for a set period of time, or term. Term life is usually the most affordable type of life insurance because it only lasts for a specific number of years, usually 10 to 30 years. Unless you buy return-of-premium life insurance, you receive nothing back if you outlive the term. However, many term life insurance policies offer the option to convert to a permanent life insurance policy at the end of the term. Many carriers also provide the option to renew a term life policy annually if you still need coverage past the expiration date.
Term insurance is designed to provide a death benefit if the insured passes away within the length of the policy term. As the name suggests, term life insurance remains active for a predetermined “term,” which is the window of time that the policyholder chooses, typically between 10 and 30 years. When the term expires, the policyholder stops paying the premiums and the death benefit will no longer be paid out. Whole life insurance is a form of permanent insurance that includes a cash value account that accumulates interest or returns. Whole life insurance is designed to remain in place for the insured’s entire life, as long as the premiums are paid.
Your age, gender, weight, health conditions and occupation are just some of the underwriting rating factors that will determine how much you pay for term insurance. The amount of coverage that you want to purchase is another key factor in determining your cost for life insurance. Insurers consider multiple aspects of your lifestyle to set premiums. For example, the use of tobacco usually leads to higher premiums as a reflection of associated health risks. In general, the younger and healthier you are, the lower the cost of the premiums will be.

Learn more: Cheapest life insurance companies
Yes, having a preexisting condition may impact your ability to purchase term life insurance. Different conditions may be considered more or less serious by different insurers. If a life insurance provider does approve you for a term life policy with a preexisting condition, your premium may be high to reflect the health risks. Insurance providers may be more likely to approve you if you have conditions that can be managed. For instance, if you have Type 2 diabetes and maintain a healthy lifestyle, you may be more likely to be approved for term life insurance. If you have a preexisting condition, speaking with a licensed insurance agent may help you navigate your life insurance options.

Written by

Mandy Sleight

Insurance Contributor