Principal Life Insurance Review

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Principal

 Principal

overall rating
4.6

Principal is a long-standing financial services company that severs 25 nations across international markets. They provide term and universal life insurance coverage in all 50 states, though whole life insurance is not available at this time. Online quotes are available for term policies, but you’ll need to go through a financial professional in order to get personalized pricing and purchase coverage.

  • Pros and Cons
  • Key Takeaways
  • Company Overview
Pros and Cons
Pros
  • Many permanent coverage options to choose from

  • Multiple term conversion options

  • Many riders to choose from

Cons
  • Whole life policies not offered

Key Takeaways
  • Principal life insurance coverage is available in all 50 states, and they offer both term and universal life policies (no whole life options).
  • Term life coverage is offered in four term lengths, and all term policies allow for full or partial conversion into universal life coverage.
  • Principal offers a wide range of universal life policies including indexed, variable, and survivorship coverage. Surrender charges are included on all universal life policies.
Company Overview

Founded in 1879, Principal offers a variety of financial products—including life insurance coverage—to customers in all 50 states and around the world. Since its introduction, Principal has grown its life insurance product menu to include a variety of term and permanent policy options, for individuals and group-based employees alike.

Principal is based in Iowa and is a member of the Fortune 500. In 2018, the company reached 19 million customers across its domestic and international markets.

  • Year Founded 1879
  • Kinds of Plans Term and universal life
  • Number of Plans 10
  • Payment Plan Options Monthly, quarterly, semi-annually, annually
  • Customer Service Phone and online contact form
  • Phone 800-986-3343
  • Official Website www.principal.com

Principal Life is not one of our top-rated life insurance companies. You can review our list of the best life insurance companies for what we think are better options.

Pros Explained

  • Many permanent coverage options to choose from: Principal offers four categories of permanent coverage to choose from: universal life, indexed universal life, variable universal life, and survivorship insurance.
  • Multiple term conversion options: All term life policies provided by Principal allow for term conversion. Options include full term conversion, partial term conversion (where a portion of the policy is converted while the remainder is kept as term coverage, creating two separate policies), and survivorship conversion (where two term policies are combined into one universal life policy). 
  • Many riders to choose from: Though not offered on every type of policy or to every issue age, Principal has a number of life insurance policy riders to choose from. These include an accelerated death benefit, waiver of premium, and a cost of living increase rider.

Cons Explained

  • Whole life policies not offered: Principal only offers term and universal life insurance coverage. Whole life policies are not available.

Available Plans

At Principal, you can choose between term life coverage and a variety of different universal life policies. Here’s a look at the options you’ll have.

Term Life

Principal offers term life coverage in 10-, 15-, 20-, and 30-year terms with coverage starting as low as $200,000. Issue ages on term policies range from 20 to 80, depending on the term chosen and whether the applicant is a tobacco user.

Available riders include an accelerated death benefit, child term, conversion extension, and waiver of premium. All term policies are also given standard policy conversion privileges, allowing policyholders to convert their term coverage to permanent, universal life insurance.

One-Year Term

Provides a face value between $200,000 and $5 million. Depending on your age at the time of issue, Principal’s one-year term (OYT) policy offers 12 months of temporary life insurance protection. Issue ages range from 20 to 99, though the policy is non-renewable and there are no rider options available.

Universal Life Flex III (UL Flex III)

Available from ages 0 to 85, Principal’s Universal Life Flex III policy offers flexible long-term protection through age 121. Coverage options start at $25,000 and go up to $1 million (or more, for some applicants) with flexible premiums.

Universal Life Flex III accumulates cash value at a guaranteed interest rate, helping you best prepare for the future. It allows for policy loans and partial surrenders and also lets you choose between three different death benefit options. It also permits policyholders to request face amount increases anytime within the first year, or face amount decreases through year five.

Indexed Universal Life Accumulation II (IUL Accumulation II)

With face values starting at $50,000, the Principal Indexed Universal Life Accumulation II policy offers permanent coverage for ages 20 to 85. The policy’s value earns interest based on underlying stock market indices, with a baseline rate of 0% (meaning that your indexed cash value cannot lose money, no matter how poorly the market performs in a given year).

There are three death benefit options (DBOs) to choose from with this policy. DBOs include: 

  • Option 1: Policy face amount
  • Option 2: Policy face amount plus accumulated cash value
  • Option 3: Policy face amount plus cumulative premiums paid minus surrenders

There are eight different rider options to choose from with IUL Accumulation II coverage. The policy also provides a 10-year no-lapse guarantee and the ability to take out policy loans if needed.

Indexed Universal Life Flex II (IUL Flex II)

The Principal Indexed Universal Life Flex II plan (or IUL Flex II) is available to applicants between the ages of 20 and 85, for as little as $100,000 in coverage. This policy enables you to invest your policy’s cash value for further growth over time, based on the performance of an underlying stock market index. Though this policy relies on the stock market for growth, interest-based returns will never drop below 0%–even when the market is performing poorly. 

The IUL Flex II policy allows for partial surrender, offers fixed policy loans, provides a 10-year no-lapse guarantee, and offers three death benefit options (DBOs) to choose from. It’s also different from the IUL Accumulation II policy in that policy face values can potentially be increased or decreased in the first few years.

Variable Universal Life Income IV (VUL Income IV)

With Variable Universal Life Income IV (VUL Income IV) coverage, policyholders can enjoy a secure death benefit along with the potential to grow that policy’s value over time through target-risk or target-date investments. It’s offered for issue ages 20 through 85 with a policy face value starting at $100,000.

Policyholders can choose from three different death benefit options (DBOs) and add further protection through 10 optional riders. DBO options include:

  • Option 1: Policy face amount
  • Option 2: Policy face amount plus accumulated cash value
  • Option 3: Policy face amount plus cumulative premiums paid minus surrenders

There’s also no penalty for withdrawing funds before age 59½, nor are there income-based funding limits with this policy. While it is more aggressive—and therefore more risky—than the other universal policies here, it does allow for even greater growth in the right market.

Survivorship Universal Life (SUL)

Principal’s Survivorship Universal Life (SUL) policy offers protection for two people, making it easier to protect both a spouse and an estate with one policy. This policy offers coverage starting at $250,000 with issue ages between 20 and 85, and a second life issue up to age 90. The policy also matures at age 121, making it a good option for those who want lifelong protection.

There are two death benefit options (DBOs) to choose from and four riders available. Policyholders can choose between the following two DBOs:

  • Option 1: Policy face amount
  • Option 2: Policy face amount plus accumulated value

The policy incurs monthly administration charges of $20 to $30, and a surrender charge is applicable in the first 19 years if you decide to cancel coverage. Policy loans and partial surrenders are available.

Principal’s policy options are a bit limited: only four term policy lengths are offered, and permanent coverage is limited to universal life policies. Whole life coverage is not an option at this time.

Available Riders

Life insurance riders offer additional benefits and coverage options to certain policyholders. Some of these riders are included automatically while others will need to be added to your Principal life policy. Additionally, it’s important to note that riders may be limited to certain policy types, locations, or even issue ages. 

Accelerated Benefits

If the insured policyholder is diagnosed with a terminal illness, he or she can pull from the life insurance policy’s death benefit to cover medical or personal expenses. Accelerated benefits are limited to 75% of the policy’s face value or $1 million (whichever is less) with a minimum payout of $500. 

Principal considers accelerated benefits to be a lien against the policy, so the withdrawal will accrue interest. When the insured passes away, their beneficiaries will receive the policy’s value minus any withdrawn accelerated benefit, plus interest. There is also a one-time administrative charge of up to $150 to access this benefit.

Waiver of Premium

If you are disabled for six months or more, this rider will allow you to keep your life insurance policy active and in good standing by waiving your monthly premiums. The rider expires at age 65 unless you’re already utilizing the benefit, in which case premiums will continue to be waived through age 95 or until your policy term ends, whichever comes first.

Cost of Living Increase

With this rider, you can elect to increase your life insurance coverage every three years through age 55. Doing so allows you to keep up with inflation and ensure that your policy is always enough to cover your living expenses, even decades after you’ve purchased it. 

Children Term Insurance Rider

This rider allows you to add term coverage for your eligible children onto an existing life insurance policy. It covers kids as young as 14 days old, providing a death benefit between $5,000 and $25,000. Coverage can also be converted into a permanent policy up to the child’s 25th birthday.

Conversion Extension Rider

The conversion extension rider can be added at the time of policy issue, and gives the insured an extended period of time in which to convert their term life insurance policy into permanent coverage. There is an additional charge to add this rider, and its coverage ends at age 70 or when the policy expires, whichever comes first.

Chronic Illness Death Benefit Advance Rider 

If you are diagnosed with a chronic illness, this rider grants the insured access to up to 75% of their policy’s value or $2 million (whichever is less). It’s not available in all states, but there is no additional charge for this rider on policies where it’s offered.

Four-Year Term Insurance Rider

Available on Survivorship Universal Life policies only, this rider allows the policyholder added protection in addition to their permanent policy’s coverage. With this rider, beneficiaries will receive 122% of the policy’s face value if both insured individuals pass away within the first four years of policy ownership.

The four-year term rider can only be added at issue and is limited to issue ages between 20 and 79. It is also non-renewable.

Note

Principal offers a variety of blended coverage options, from partial term conversion to a four-year term rider that boosts the protection offered by survivorship universal life plans.

Customer Service

Principal life insurance policyholders have a few options when it comes to managing their life insurance coverage. 

If you’d prefer to reach a real person with your general questions, representatives are available. The number to call is 800-986-3343.

Principal policyholders can also set up a personal account through the company’s online portal, at principal.com. A PIN is needed to log in, which you can get by calling customer service

You can also send your request through the company’s online contact form. Yet another option is to consult their help FAQs.

Complaint Index

The National Association of Insurance Commissioners (NAIC) tracks complaints and helps consumers understand if they are happening more or less frequently than expected. 

This complaint index is adjusted according to the company’s market share, so that the baseline is always 1.00. If a company receives more complaints than expected, they’ll have a complaint index above 1.00; receiving fewer complaints than expected will instead earn them an index below 1.00.

According to data provided by the NAIC, Principal performs better than expected in terms of its complaint index. In 2019, the insurer received only five individual life insurance complaints, resulting in a complaint index of 0.32. This index was also low in 2018, only reaching 0.28, and in 2017 it was 0.19.

Third-Party Ratings

Ratings from trusted third-party platforms can help consumers get an unbiased idea of a company’s strength and performance. 

According to the J.D. Power 2019 U.S. Life Insurance Study, Principal was ranked fourth among 25 listed companies. They received four out of five stars based on things like consumer satisfaction, customer service, pricing, availability, and products offered.

When it comes to financial stability ratings, Principal has received an A+ (Superior) rating from AM Best. This is the second-highest rating possible and indicates a stable outlook for the insurer.

Cancellation Policy

If you decide that a Principal life insurance policy isn’t right for you after you’ve purchased it, there are a few routes you can take to cancel.

When it comes to term policies, there is no accumulated cash value and the policy isn’t intended to be permanent. If you want to cancel, it’s as simple as submitting a request for such. Theoretically, your policy would/could also be canceled by failing to pay monthly premiums as scheduled.

Things are a bit more difficult when it comes to canceling a permanent policy. With Principal, all universal life policies incur a surrender charge if the policy is terminated early. This charge—which varies according to the policy type and how far along into the policy termination happens—can have a significant impact on the cash surrender value.

Principal does offer a 61-day grace period on universal life policies before surrender charges occur. If scheduled payments are not made prior to the 62nd day, coverage is terminated and any applicable surrender fees are applied.  

Price

When calculating the cost of your life insurance coverage, an insurer will take many different factors into consideration. These include the type of policy chosen, the amount of coverage added, as well as your:

  • Age
  • Gender*
  • Health
  • Personal and family medical history  
  • Location

*Non-binary applicants will typically find that insurers base premiums on their assigned birth gender. Being non-binary will not directly affect your premiums or prevent you from purchasing coverage. Through Principal, you can request unisex life insurance rates in addition to traditional, gender-distinct rates.

Principal does offer an online term life quote calculator tool, which can help you determine how much coverage to buy and what it will cost. Through this tool, we found that a 35-year-old Virginia woman could buy $1 million in 30-year term coverage for about $58 a month.

Competition

Before choosing a life insurance company, it can be helpful to know how they measure up against the competition. This allows you to compare apples to apples and gauge whether you’re choosing the right policy for you, at the right price.

To this end, we have compared Principal life insurance against Banner Life, an insurer with a similar market share and ratings.

  Principal Banner Life
Number of States Where Coverage Is Available 50 49
Number of Plans 10 8
Service Method Financial professionals Agents
AM Best Rating A+ A+
Price Rank Average Average
Complaints Trend 0.32  0.13

Both companies are relatively small and account for less than 1% of the U.S. life insurance market share. Both hold an A+ financial strength rating from AM Best, offer average pricing for coverage, and have about the same number of policy options to choose from. 

There are also quite a few differences, though. For example, Principal operates in all 50 states but Banner Life does not provide coverage in New York. Principal received an impressive complaint index of 0.32 for 2019. However, that is still no match for Banner Life’s exceptional result of 0.13 in 2019. 

Also, though the two companies are similar in size, they fared very differently in terms of reputation. For insurance, Principal ranked fourth (out of 25 companies) in the most recent J.D. Power life insurance study, while Banner Life didn’t even make the list. For this reason—and because Principal offers a few more policy options—we give Principal the edge over Banner Life.

Verdict

Principal is a highly rated and long-established financial services company, providing life insurance coverage to all 50 states as well as in international markets. While there are a number of universal plans to choose from with Principal, term coverage is limited to four possible term lengths and there are no whole life options available. A healthy variety of policy riders is offered, though not all options are available on all policies or in all states.

Principal consistently outperforms many of its peers with high customer satisfaction ratings, a healthy financial stability score, and a below-average number of consumer complaints each year. Though coverage options may seem a bit limiting to some, advanced underwriting does make it easy for many consumers to get approved for a policy in as little as a day with no need for medical exams or health screening questions.

How We Review Life Insurance Carriers

In order to provide you with an accurate and comprehensive review of a life insurance carrier, we analyze a number of important factors. This means comparing a company’s consumer satisfaction ratings and financial strength grades against those of its competitors. We review its market share, analyze its history, and gather evidence of its overall reputation. We also consider each insurer’s pricing, underwriting methods, communication and purchase options, and coverage general availability, to help you choose the right company for your individual needs.

Learn more: Read our full Life Insurance Review Methodology.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy .
  1. National Association Of Insurance Commissioners. "Principal Life Ins Co

    National Complaint Index Report." Accessed November 18, 2020.

  2. J.D. Power. "2019 U.S. Life Insurance Study." Accessed November 18, 2020.

  3. Principal. "Credit Ratings." Accessed November 18, 2020.

  4. Legal & General. "Our Strength." Accessed November 18, 2020.

  5. National Association of Insurance Commissioners. "Banner Life Ins Co

    National Complaint Index Report." Accessed November 18, 2020.