Scott Karstens is a writer and accomplished insurance and financial services veteran. He’s the president of NFG Brokerage and founder and CEO of both Broker Backoffice and his new direct-to-consumer insurance platform, Quote Bot.
Edited by Ryan Lasker ContributorRyan Lasker is a financial writer and editor with bylines in Morning Brew, The Motley Fool, and several more. As a certified public accountant, he leverages his technical expertise in personal finance and tax to fuel his passion for teaching financial literacy. When he’s not writing, editing or working in a spreadsheet, he’s biking the D.C. trails or reading.
Our Research Process Edited by Ryan Lasker ContributorRyan Lasker is a financial writer and editor with bylines in Morning Brew, The Motley Fool, and several more. As a certified public accountant, he leverages his technical expertise in personal finance and tax to fuel his passion for teaching financial literacy. When he’s not writing, editing or working in a spreadsheet, he’s biking the D.C. trails or reading.
Why Trust UsOur editorial team follows a strict methodology for reviewing life insurance companies.
34 Companies Reviewed 60,346 Quotes CollectedOur team collected more than 60,000 sample quotes from life insurance companies using unique user profiles to give readers an accurate view of pricing across competitors. We gather quotes for ages 18 to 75 years old for 62 life insurance providers.
19 Rating FactorsWe score life insurance companies based on 19 different factors to provide you with a comprehensive rating.
3,000 Policyholders SurveyedYou might know that life insurance provides financial protection for individuals and their families in the event of death or disability. However, you might not know many of the terms that you read or hear about when shopping for life insurance — and that is totally normal.
We at the MarketWatch Guides team prepared a list of essential life insurance terms that can help you make sense of how life insurance works.
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Knowing key terms such as beneficiary, riders, premiums and cash value is essential when making decisions about what kind of policy and the amount of coverage to choose. Below is a list of some key terms that will help you understand what you’re being shown when you buy life insurance.
Life insurance provides financial protection for individuals and their families in the event of death. This financial protection comes in the form of a death benefit, which generally provides a lump-sum payment to beneficiaries when the insured person passes away.
Life insurance premiums are the amount of money that policyholders pay to maintain their life insurance coverage. They are usually paid on a monthly, quarterly or annual basis. The premium amount can vary depending on factors such as gender, age, health history and lifestyle. Your premiums are also influenced by your insurance needs — the more coverage you need, the higher the premiums. Premiums typically remain fixed for the length of the policy; however, some policies allow for flexible payments.
A life insurance death benefit is a lump-sum payment made to the designated beneficiary of the policy upon the death of the insured person. The amount of this payment is typically determined when purchasing a life insurance policy and can be used to help cover funeral costs, debts or other financial losses resulting from the death of the insured individual.
A life insurance policyholder is the owner of the life insurance policy and has all legal rights to affect the life insurance policy. The owner can transfer ownership, change payment, change the payor and can designate a beneficiary or many beneficiaries.
The insured in a life insurance policy is the individual whose life is covered by the policy. They are typically required to provide personal information such as age, occupation and medical history in order to be accepted for coverage, and their premiums are based on these factors. The death benefit of the policy will be paid out upon the insured’s passing.
The beneficiary of a life insurance policy is the individual who or entity that will receive the death benefit upon the death of the insured. Beneficiaries are typically designated during the policy purchase, and they can be changed at any time as long as the policyholder is alive and is legally competent.
A life insurance rider is an additional coverage option added to a life insurance policy that often provides extra protection at an additional cost. Riders can cover a variety of potential situations, such as waiver of premium due to disability, chronic illness, long-term care, critical illness, accidental death or dismemberment and more.
Life insurance underwriting is the process of assessing risk and determining an individual’s eligibility for life insurance coverage. The process typically involves reviewing an individual’s health through a medical exam and an application that covers a range of information about the applicant including lifestyle, occupation and other relevant factors in order to calculate a premium rate based on the individual’s risk to the insurance company. In cases where there is no medical exam required, underwriting utilizes electronic health data and other data to determine eligibility.
The surrender value of a permanent life insurance policy is the amount of money that a policyholder may withdraw when canceling the policy before it reaches maturity or is used to fund a death benefit. Generally, the surrender value of a policy is the amount of premiums paid, plus interest accrued, minus any surrender charges. If the policyholder cancels the policy before its surrender period — which is usually 10 or 15 years — the policyholder will pay a hefty surrender charge.
A mutual life insurance company is a type of insurer owned by its policyholders, who are also the beneficiaries and have a say in how the company is managed.
Dividends from a whole life policy refer to the portion of a life insurance company’s profits that are paid back to policyholders. Profits come from the life insurance company’s excess sales, savings on expenses, lower-than-expected death benefit claims and excess investment returns.
A life insurance policy’s face value is its death benefit: a lump-sum payment made to the designated beneficiary of the policy upon the death of the insured person.
The accumulated cash value of a life insurance policy represents a portion of your premium payments that you can borrow against, make a withdrawal from, or use to pay premiums. Be aware that withdrawing from your cash value account generally affects the amount of future death benefits.
Knowing the different types of life insurance can help individuals make an informed decision that best meets their needs. This article will provide an overview of the types of life insurance available.
Individual life insurance is a type of policy that is owned by and paid for by an individual, unlike group life insurance. Individual life insurance policies are controlled entirely by the individual owner of the policy. It provides protection to an individual in the event of death.
Group life insurance provides coverage to a group of people, such as employees of a company. Access to this coverage is provided by the employer and it is often not portable if you change employment.
Term life insurance provides financial protection for a fixed period of time, has no cash value growth and has fixed premium payments. It is common to see policy term lengths shown as 10-year term, 15-year term, 20-year term, 25-year term and 30-year term.
Whole life insurance is a type of permanent life insurance policy that provides a guaranteed death benefit, guaranteed cash value growth and non-guaranteed dividend growth. Participating whole life insurance pays non-guaranteed dividends, and non-participating whole life insurance does not pay dividends.
Universal life insurance is a type of permanent life insurance policy that offers flexible premiums and the ability to adjust the death benefit. It also combines a savings element that can accumulate over time through a fixed interest rate declared each year.
Variable universal life insurance is a type of permanent life insurance policy that provides the policyholder with the flexibility to adjust the death benefit, premiums and savings element through subaccounts. These subaccounts are designed to be managed similarly to mutual funds and often carry the name, and are separately managed by a mutual fund company. These funds are subject to market risk and require an insurance agent with a securities license to sell them.
Indexed universal life insurance is a type of permanent life insurance policy where a portion of the policy’s cash value goes into an account whose interest rate is linked to an index, such as the Standard & Poor’s 500. Generally, the principal amount of the policy is protected from market losses, but there may also be a cap on annual growth. For example, if your policy’s cap is 10%, and the index grew by 15% during the year, your index-linked cash value account will only earn 10% for the year.
Permanent life insurance is a generic term used to describe multiple types of life insurance products designed to last your entire life — unlike term life insurance, which lasts some fixed period of time, such as 10 or 15 years. Types of permanent life insurance include whole life insurance, universal life insurance, indexed universal life insurance and variable life insurance.
Variable life insurance is a generic term most often used when talking about variable universal life insurance. These policies’ payouts hinge on market returns, and you may lose some or all of your principal inside the policy.
Guaranteed-issue life insurance does not require medical examinations or health questions in the application process. It provides coverage regardless of pre-existing conditions, offers limited death benefits and often requires a two-year waiting period before receiving full benefits.
Simplified-issue life insurance requires minimal health information from the applicant and does not require a medical exam in order to be approved. It is an alternative to guaranteed-issue life insurance and offers immediate coverage with higher death benefits than guaranteed-issue policies.
Survivorship life insurance provides coverage for two or more individuals, usually spouses, with the death benefit being paid out upon the passing of the last insured individual.
Funeral insurance, sometimes called final expense insurance, provides coverage to individuals to cover the cost of funeral expenses upon their death. It typically pays out a lump-sum cash benefit directly to a pre-arranged funeral home with the remaining benefit, if any, to the beneficiaries.
Burial insurance, much like funeral insurance, provides financial coverage to individuals for the costs associated with their burial expenses upon their death. This type of policy usually pays out a lump-sum cash benefit directly to a pre-arranged funeral home or cemetery.
