Shopping around for life insurance can feel overwhelming, mostly because there are so many decisions to make. You have to decide how much life insurance coverage you'll need, but you also have to compare companies' financial strength and ratings. Then comes another important question: Should you get term life insurance that lasts only for a specific number of years, or should you purchase permanent life insurance coverage that lasts a lifetime?
While only you can decide which type of life insurance is best for your needs, universal life insurance coverage is popular for several reasons and may be the solution you're looking for. Universal life insurance is permanent, so the benefit lasts for your lifetime. You may have the option to increase the death benefit of your policy if you pass a medical exam, and the savings account component of your policy typically earns interest. Once you accumulate money in a universal life policy, you may be able to use it to alter your life insurance premium amount.
We compared more than 20 universal life insurance carriers to rank them based on financial strength, available riders and add-ons, and industry ratings. Here are the best companies you should consider for your universal coverage.
The 5 Best Universal Life Insurance Companies of 2021
Best Overall: Northwestern Mutual
We chose Northwestern Mutual as the best universal life carrier because of its financial strength and top standing in the industry, its range of life insurance products including a single premium universal life policy, and the fact that you can get full-service financial planning and life insurance from the same provider.
Excellent ratings for financial strength
Work with a financial planner to find the right life insurance policy for your needs
No online quote option
Northwestern Mutual has been in operation since 1859, which means it has more than 160 years of experience providing life insurance to consumers. During that time, this popular company has become the highest rated in the business. Northwestern Mutual earned 4th place in the J.D. Power 2020 U.S. Life Insurance Study, for starters, with 790 out of 1,000 possible points. Meanwhile, the company has superior ratings for financial strength, including an A++ rating from AM Best and an AA+ rating from S&P Global.
Northwestern Mutual is known for its high-quality life insurance coverage, which includes term life insurance, universal life, and whole life. There's also the benefit of working with a Northwestern Mutual financial advisor to decide on the appropriate type and level of coverage. The company's financial advisors can provide additional help with financial planning or retirement planning, as well.
You can customize your coverage with a flexible Custom Universal Life (CUL) policy option that lets you decide how to build cash value that is tax-deferred. You also have the option to fully fund a universal life policy with a single premium, which can be a good benefit if you receive an inheritance or a bonus you want to use for the full premium amount.
On the downside, Northwestern Mutual does not make it easy to get a quote for universal life without speaking to a financial advisor and providing more information on your finances and your long-term goals. With that in mind, they may not be the best option if you want to buy life insurance online.
Read the full review: Northwestern Mutual Life Insurance
Best Reputation: State Farm
State Farm has a tremendous reputation and scored first place in the J.D. Power 2020 life insurance study. The company also offers tons of options for its universal life policies.
Excellent ratings for financial strength and customer satisfaction
Universal life policies can be customized in great detail
State Farm is not licensed to offer life insurance in Massachusetts, New York, or Wisconsin
State Farm was founded in 1922 by a farmer and has since grown to number 36 on the Fortune 500 list of largest companies. State Farm has excellent ratings, having secured the top spot in the J.D. Power 2020 U.S. Life Insurance Study with 838 out of 1,000 points. State Farm boasts an A++ rating with AM Best and an AA rating with S&P Global, both of which are considered excellent.
State Farm offers a wide range of life insurance products including term life, whole life, and universal life. Its universal life insurance policies stand out from the pack thanks to their overall flexibility and the fact you can tailor your coverage to your unique needs.
With a universal life insurance policy from State Farm, you can buy coverage up to age 85 that lasts a lifetime. You can also choose a level death benefit that will not change, or a death benefit that varies based on your account value. Further, you can tailor your policy even more with a level term rider, a children’s term rider, a guaranteed insurability option, a disability waiver, or a flexible care benefit rider.
How much does universal life insurance from State Farm cost? That really depends on your age, your health, and where you live. For universal life, you must speak with a State Farm agent to get a quote.
We appreciate State Farm’s great variety of universal life options as well as the company's great reputation and financial strength.
Read the full review: State Farm Life Insurance
Best Indexed Universal Life Insurance: Mutual of Omaha
We chose Mutual of Omaha for its indexed universal life insurance policies because the company offers the utmost flexibility in its indexed products, which allows you to buy coverage that suits your goals.
Mutual of Omaha has excellent ratings for financial strength
Their indexed universal life insurance coverage lets you tailor your policy to your needs, including providing an emphasis on cash growth potential or flexibility
You have to work with a Mutual of Omaha agent in order to get a quote for universal life insurance
Mutual of Omaha was founded in 1909 and offers a wide range of insurance and investment products. Mutual of Omaha secured the fifth spot in the J.D. Power 2020 U.S. Life Insurance Study with 789 out of 1,000 possible points. The company has impressive third-party ratings for financial strength, with an A+ rating from both AM Best and S&P Global.
While Mutual of Omaha offers products like term life insurance and whole life insurance, we chose them specifically as the best indexed universal life insurance provider based on the fact that they have such diverse offerings. Their indexed universal life insurance comes in two forms: Life Protection Advantage and Income Advantage.
Both types of coverage are permanent, but the Income Advantage product emphasizes the cash growth potential of your policy, whereas the Life Protection Advantage option provides more flexibility. All of Mutual of Omaha's universal life insurance policies, including indexed universal life insurance, come with a death benefit, cash value accumulation, tax advantages, flexibility, and the option to accelerate a portion of your death benefit in the event you’re diagnosed with a terminal illness.
One downside of Mutual of Omaha, however, is that you cannot get a quote for their universal life insurance policies online. You must work with an agent to get a free quote, which means providing substantial financial and medical information.
Read the full review: Mutual of Omaha Life Insurance
Best Variable Universal Life Insurance: Prudential
We picked it because Prudential’s variable universal life insurance policies come with more rider options than all the other policies we profiled. Prudential also has strong ratings for financial strength, so this is coverage you can count on.
Prudential has strong ratings for financial strength
Multiple types of variable universal life coverage are available
Company has a long history of quality and success
No online quotes
Too many options can be overwhelming when presented together
Prudential Financial has been in operation since 1875, offering insurance products, investments, workplace benefits, and more to a broad range of individuals and employers. The Prudential Insurance Company of America has an A+ rating with AM Best and an AA- rating from Standard & Poor’s.
Prudential carries a wide range of life insurance products including term life insurance, universal life insurance, variable universal life insurance, and indexed universal life insurance. Prudential's variable universal life insurance coverage stood out to us specifically due to the broad range of add-ons and riders you can utilize to customize your policy.
With variable universal life from Prudential, you can purchase coverage with a lifetime benefit with underlying investment options that can boost the long-term cash value of your policy. Riders available include a living needs benefit rider, an accidental death benefit, a children's level term rider, an enhanced disability benefit, an enhanced cash value rider, overloan protection, an estate protection rider, and more. These policies also come with a choice of over 50 underlying investment options or a fixed rate option, both of which you can use to build cash value you can withdraw or borrow against.
You cannot get a quote for universal life insurance coverage without speaking with an agent and providing financial and medical information, however (a free online quote is available for term life insurance coverage).
Read the full review: Prudential Life Insurance
Best Customizable Policy: AAA Life Insurance
We chose AAA Life Insurance because it offers the most customizable universal life insurance thanks to its varied menu of add-ons you can use to tailor either of its two base plans. AAA also offers term life insurance, whole life insurance, and universal life insurance, and you can speak with an agent to help meet your life insurance goals.
AAA has strong ratings for financial strength
Purchase different types of life insurance coverage, then tailor your policy to meet your needs
Online quotes for term life insurance coverage only
Limited universal life insurance options (i.e., no indexed universal life or variable universal life)
AAA Life Insurance became part of AAA in 1969 and currently has more than 1.3 million active policies. This company boasts an A rating for financial strength from AM Best.
AAA Life Insurance focuses on offering term life insurance, whole life coverage, and universal life insurance, though guaranteed issue whole life insurance is also available, for which you can apply and get coverage online without a medical exam.
What really caught our eye, however, is how flexible and customizable AAA's universal life insurance policies are. Specifically, there are two main types of universal life: LifeTime Universal Life and Accumulator Universal Life. Both plans offer benefits that start at $100,000, although you can purchase more coverage depending on your needs. Where LifeTime Universal Life comes with permanent coverage with guaranteed level premiums, Accumulator Universal Life focuses on accumulating cash value.
Optional add-ons you can use to customize your policy can vary but may include child term coverage, waiver of monthly deductions, an accidental death benefit, and a guaranteed purchase option that allows you to increase your death benefit at a later date.
While AAA doesn’t allow you to get a free quote online and without going over your personal situation with an agent, it does state that a 35-year-old female who doesn’t smoke may be able to purchase $100,000 in universal life coverage starting at $75.91 per month.
Read the full review: AAA Life Insurance
What Is Universal Life Insurance Coverage?
Universal life insurance is a type of permanent life insurance coverage that is meant to last for your entire life, which makes it different from term life insurance that only lasts for a specific period of time. Of the two types of permanent coverage, whole life and universal life, universal life insurance coverage tends to come with lower premiums and more flexibility than whole life.
The main components of universal life insurance coverage are a death benefit and a savings element that builds cash value over time. However, most universal life insurance policies also let you tweak your monthly premiums to make them more affordable as the cash value of the policy increases.
Is Universal Life Insurance the Same as Whole Life Insurance?
Universal life insurance and whole life insurance are both permanent insurance products, meaning they are built to last your entire life. While both types of policies let you borrow against the cash value that builds in them over time, there are some important differences between these two types of coverage:
- Whole life insurance policies can pay dividends for the company during financially profitable years, whereas universal life does not pay out dividends.
- Universal life insurance coverage often lets you decrease or increase your amount of coverage over time and without a medical exam.
- Universal life can let you adjust the premium amount you pay over time.
- Whole life insurance tends to be more expensive due to the death benefit coupled with dividends.
Which Is Better: Term or Universal Life Insurance?
Where universal life insurance coverage provides a lifetime death benefit and a savings component, term life insurance coverage is more simple in its nature. With term coverage, you buy a flat amount of life insurance coverage for a fixed term, usually 10 to 30 years. Once the policy timeline is over, your life insurance coverage is no longer in force and you don’t need to pay any more premiums.
The right type of coverage for you truly depends on your needs and goals. However, term life insurance coverage is typically less expensive than other types of life insurance. For that reason, it is often the best option for parents who want to purchase coverage to replace their income during their working years, or for people who want to leave some money behind to pay for residual debt such as student loans.
In a recent interview with Andrew Mais, commissioner of the Connecticut Insurance Department, he said "Think of term insurance as a function of time. Term life insurance is for a specified number of years, such as 10 or 20 years. It could be the length of your mortgage, for instance, or until your kids are out of college. You’ve got that coverage for that time and you're going to be paying for that time. There’s no accumulation of value. It's simply straight insurance."
Universal life, on the other hand, can come with tax advantages and cash value benefits that can make sense for consumers who need a more complex solution to their financial needs. If you’re unsure of which type of life insurance to buy, it might help to speak with a financial advisor about your concerns and goals.
What Are the Expected Costs of Universal Life Insurance?
As you may have noticed from the insurance reviews above, premiums for universal life insurance can vary widely, from $70 per month to several hundred dollars per month. Note that the minimum premium amount for these policies depends on the applicant’s age, state of residence, and health. Policy premiums can also vary widely depending on how much coverage you want to purchase and how high the death benefit of your policy needs to be. Additional riders you select will also add to the total cost of your policy. With that in mind, you’ll need to shop around among insurers to get a life insurance quote for your own policy.
Most insurance companies require new applicants to chose either "male" or "female" when applying for insurance; and don't always offer an option for those who identify as nonbinary or transgendered. While being nonbinary doesn't disqualify you from getting insurance, you should be aware that most insurance companies haven't updated their underwriting processes to reflect an awareness of gender issues.
How We Chose the Best Universal Life Insurance Companies
When selecting the best universal life insurance companies for our ranking, we considered a wide range of important factors such as company history, financial strength, and ratings from third parties like J.D. Power. We also looked at companies in terms of the coverage they offer, the additional riders and add-ons you can use to customize your life insurance policy, and the functionality of each of their websites. We gave special consideration to each company's quote process, as consumer preferences can vary widely; some may want the convenience of online quotes without the added step of speaking with an agent, while others may be better served by a knowledgable agent who can help clients work through various financial needs and goals to arrive at just the right coverage balance.
J.D. Power. "Life Insurance Customer Satisfaction Flatlines Despite Pandemic Fears, J.D. Power Finds." Accessed Dec. 31, 2020.
Northwestern Mutual. "OUR COMMITMENT TO FINANCIAL STRENGTH." Accessed Dec. 31, 2020.
Fortune. "Fortune 500 State Farm Insurance." Accessed Dec. 31, 2020.
State Farm. "State Farm® Financial Strength and Insurance Ratings." Accessed Dec. 31, 2020.
Mutual of Omaha. "Financial Strength." Accessed Dec. 31, 2020.
Prudential. "Ratings." Accessed Dec. 31, 2020.
AM Best. "AAA Life Insurance Company." Accessed Dec. 31, 2020.
Investopedia. "Taking the Mystery Out of Life Insurance." Accessed Dec. 31, 2020.