Transamerica Life Insurance Review
AM Best Rating
Term, Whole, Universal
On September 12, 2019, A.M. Best announced that they had downgraded the financial rating from A+ to A for Aegon U.S subsidiary TransAmerica Life Insurance Company.
If you are considering buying a life insurance plan from Transamerica, don't let their recent downgrade discourage you. Transamerica still has an excellent rating and a stable outlook. Plus, they are highly likely to bounce back and reclaim their superior financial rating.
In this review, we will discuss the policies offered by Transamerica, its financial strength, as well as the upsides and downsides of choosing the company as your insurance provider.
Transamerica has hit a speed bump when their financial rating was downgraded by A.M. Best. However, A.M. Best is only one out of four major third party rating agencies. Financial ratings from S&P, Moodys, and Fitch remained unchanged. If you are closely considering a policy from Transamerica, it is safe to move forward as Transamerica is still one of the best life insurance companies in the US.
Transamerica was established in 1904. Initially, it was based in San Francisco, which is home to the iconic Transamerica Pyramid building. Currently, the company is headquartered in Cedar Rapids, Iowa.
In 1999, Transamerica was acquired by Aegon, which is one of the largest financial services companies in the world today. The company now operates as a wholly-owned subsidiary of Aegon, employing over 29,000 people and serving over 13 million customers. Read more about the history of Transamerica.
Transamerica Financial Ratings
Transamerica's financial ratings are strong across the board. They hold high ratings from each of the 4 major third party financial ratings agencies. Their AM Best rating was downgraded from A+ to A in September of 2019, but their outlook remains stable.
Below are Transamerica’s finanial ratings.
- AM Best: A
- Moody’s: A1
- Standard & Poor’s: AA–
- Fitch: A+
- Source of Ratings
As you can see, Transamerica has received top-notch ratings from all the major agencies, which is testament to the fact that the company is financially stable and secure.
Term Life Insurance
Transamerica offers two types of term life policies: Trendsetter Super Series and Trendsetter LB
Trendsetter Super Series
The policy allows you to choose from five different term lengths – 10, 15, 20, 25, and 30 years. The death benefit can be anywhere from $25,000 to $10 million. At the end of the coverage period, you have the option of converting your term plan into a permanent life plan.
The best part about the convertibility option is that you do not have to undergo any medical exam. You are required to answer a few questions on your health condition, based on which your insurability is determined and a policy is issued for you.
The policy offers five term lengths for you to choose from – 10, 15, 20, 25, and 30 years. The death benefit can be up to $2 million. The policy includes an accelerated death benefit component, which is designed to provide living benefits to eligible policyholders.
During the course of the policy, if you happen to develop a chronic, critical, or terminal disease, you become eligible to receive a portion of the death benefit, which can help you pay for the treatment.
Transamerica also allows you to decide if your term policy’s death benefit should increase, decrease, or stay the same throughout the coverage period.
In this type of policy, the death benefit and the premium increase steadily throughout the coverage period. It is ideal for people in their early 20’s, as the premium is very low at the start of the coverage period. As the premium increases, your income is also likely to increase, which makes it easier for you to pay for the policy.
In this type of policy, the death benefit and the premium decrease at regular intervals throughout the coverage period. As your mortgage and other such debts grow smaller in size year after year, so does your policy’s death benefit.
This is the most common type of term life policy, in which the death benefit amount and the premium remain unchanged throughout the coverage period. Most people prefer to buy level term policies, as their beneficiaries stand to receive the entire death benefit amount, irrespective of when they pass away.
Whole Life Insurance
Transamerica offers individual as well as group whole life insurance policies which are designed to cover your funeral and burial expenses. The policies also have a cash value portion, which accrues interest and grows in value at a steady rate. In case of an emergency, you can access the money in your cash value account – either in the form of a withdrawal or a loan. If you fail to repay the money you borrow, it will be deducted from the death benefit.
Universal Life Insurance
Transamerica offers three types of universal life policies – index universal life, group universal life, and variable universal life.
Index Universal Life
The policy has two components – a guaranteed death benefit (which will be paid out to your beneficiaries in the event of your death) and a cash value portion (which you can access in case of an emergency).
The policy also gives you the option to structure your own premium payment schedule – you can choose the amount you want to pay as well as the frequency of payments, with respect to certain terms and conditions.
Since it is an indexed policy, the growth of the cash value account is linked to the growth of an equity index account. Since index funds are known to perform better than other types of funds, your cash value account is likely to grow at a much faster rate compared to a standard interest paying account.
The most important aspect of the policy is that the cash value account is protected against negative index performance. The policy has a guaranteed interest rate, which the company calls a ‘floor’, which is credited to your cash value account irrespective of market conditions.
This way, you get the best of both worlds. If the market performs well, your policy accumulates a lot of cash value. If it performs poorly, your account is still credited with the minimum guaranteed interest, which means it does not lose value at any point, irrespective of how bad the index account performs.
Group Universal life
This is a regular universal life policy which is only provided through employers. It offers a death benefit which is guaranteed and a cash value portion which grows at a fixed rate.
Variable Universal Life
The policy has a guaranteed death benefit, which your beneficiary stands to receive in the event of your death, and a cash value component, whose growth is subject to market conditions.
The money in the cash value account is invested in a number of subaccounts, whose growth is tied to the performance of the stock and bond markets. Since the money is invested in different types of accounts, the potential for growth is much higher compared to a fixed-rate account or an indexed account.
You should, at the same time, remember that variable universal life policies are not protected against market volatility. So, if the market is on a downslide, your policy’s cash value will go down as well.
The policy also allows you to choose how much premium you want to pay and in what frequency you want to pay it, as long as the amount in the cash value portion is sufficient to cover the monthly deductions made by the company.
Final Expense Insurance
Transamerica offers three types of final expense policies – Immediate Solution, 10 Pay Solution, and Easy Solution. There is no medical exam required for any of these policies, but you have to answer a few health questions.
Immediate Solution – You are eligible to apply for the policy as long as you are within the age of 85. The death benefit can range from $25,000 to $50,000, depending on your age. The premium remains unchanged throughout the coverage period.
10 Pay – The policy has a 10-year level premium period and can be issued until the age of 85. The death benefit can be anywhere from $25,000 to $50,000 depending on your age.
Easy Solution – The policy is available for anyone within the age of 80. It has a graded death benefit. If you pass away due to natural causes within the first two years, your beneficiary will receive 110% of the premiums you paid.
From the third year onwards, your beneficiary stands to receive the entire death benefit amount, irrespective of when you pass away. The graded death benefit clause is not applicable for accidental deaths. So, if you die in an accident at any point during the coverage period, your beneficiary will be paid the entire death benefit amount.
Read on to learn about the pros and cons of choosing Transamerica as your insurance provider.
Pros of Transamerica
Wide Range of Policies
Transamerica offers a wide range of insurance products. Your choices include term life, whole life, index universal life, variable universal life, and final expense policies. So no matter what kind of financial commitments you have and what your budget is, you are likely to find a policy that suits your needs.
Transamerica’s term life policies are very flexible. You can choose from five different term lengths and also have the option to convert your term plan into a permanent plan at the end of the coverage period.
You can also decide if you want the death benefit to increase, decrease, or remain the same throughout the duration of the policy. The flexible terms and conditions allow you to customize your term policy to a great extent, which is definitely an advantage as no two people have the same requirements when it comes to life insurance.
Transamerica has lenient underwriting guidelines for people over the age of 70, people with high cholesterol, people with hepatitis c, people with schizophrenia, and people with certain types of heart diseases. Its policies are also competitively priced for smokers, compared to most other insurance companies.
Transamerica’s index universal life policy is protected against market volatility. If the equity index fund performs well, your policy’s cash value grows faster. If it does not perform well, your cash value account is still credited with interest, which is guaranteed by the company. So, irrespective of how the stock and bond markets perform, your policy’s cash value will grow at a guaranteed rate.
Cons of Transamerica
Limited Death Benefit for Whole Life Insurance
Transamerica’s whole life policy offers a death benefit of $50,000, which is not sufficient to cover major financial commitments like mortgage, children’s education, and business loans.
It can only cover your final expenses as well as any minor debts that you might have. It makes little sense, since the company also offers a final expense policy which is specifically designed for this purpose.
Below Average Customer Service
Many policyholders are of the opinion that Transamerica’s claim settlement process is slow. Many consumers also say that the company’s representatives are hard to reach and the customer service team is not very helpful in many cases.
Is Transamerica the Right Choice for You?
If you are looking to buy term life insurance, Transamerica is an excellent choice. Its term life policies are top notch – multiple term length choices, generous death benefit, living benefits, and the option to convert into permanent life plan.
If you, on the other hand, are in need of a whole life policy, Transamerica is not a prudent choice, since the death benefit maxes out at $50,000. There are several insurance providers that offer whole life policies with a much larger death benefit, which is sufficient to cover all your financial needs.
Transamerica tends to charge a higher rate for the following categories of people.
- People with high blood pressure
- People who are overweight
- People who have asthma
- People with a family history of stroke
- People who have been convicted of a DUI
If you belong to any of the aforementioned categories, you should look for other companies with lenient underwriting policies. On the whole, Transamerica is a very reliable insurance provider, whose life insurance policies are designed to cover a wide variety of financial needs. You can compare Transamerica’s policies with other companies and decide if it is the right choice for you.