What Are the Different Types of Life Insurance?

There are two basic types of life insurance: Term Insurance and Cash Value Insurance:

Term Policy Life Insurance

Term Policies provide life insurance for a specified period of time. These policies provide benefits in the event of death, but they generate no cash value. Keep in mind that the cost of term insurance increases as you get older, which may make it more expensive than cash value insurance in the long run. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.

Cash Value Life Insurance

Cash Value or permanent insurance pays a death benefit whenever you die - even if you live to 100! There are three major types of whole life or permanent life insurance - traditional whole life, universal life, and variable universal life, and there are variations within each type.

Cash value life insurance is available in Variable, Whole Life and Universal Life:

Whole Life Insurance

Whole Life Insurance (also known as straight life, ordinary life, and traditional permanent insurance) has guaranteed premiums and death benefits, and a minimum interest rate, which will be credited to the funds accumulated in the policy.

Universal Life Insurance

Universal Life Insurance offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest.

Variable Life Insurance

Variable Life Insurance differs from whole life insurance and universal life insurance in that policy owners direct the distribution of their premium payments among several different accounts or funds rather than by the company's choosing.