What are the different types of life insurance?

Term Life Insurance

Term life insurance provides coverage for a specific period, known as the term. If the insured dies within this term, the death benefit is paid to the beneficiaries. It is typically the most affordable type of life insurance. Here are its key features:

• Fixed Term: Coverage lasts for a set period, such as 10, 20, or 30 years.


• Renewability: Policies can often be renewed at the end of the term, though premiums may increase.


• No Cash Value: Unlike permanent life insurance, term life policies do not accumulate cash value.


• Affordability: Generally, term life insurance has lower premiums compared to permanent life insurance.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that provides lifelong coverage as long as premiums are paid. It also includes a cash value component that grows over time. Key features include:

• Lifetime Coverage: Coverage lasts for the insured’s entire life.


• Fixed Premiums: Premiums remain constant throughout the life of the policy.


• Cash Value: Part of the premiums goes into a savings component, which grows tax-deferred and can be borrowed against or withdrawn.


• Guaranteed Death Benefit: The death benefit is guaranteed as long as premiums are paid.

Universal Life Insurance

Universal life insurance is another type of permanent life insurance that offers more flexibility in premium payments and death benefits. It also includes a cash value component. Key features include:

• Flexible Premiums: Policyholders can adjust their premium payments and death benefits within certain limits.


• Cash Value: The cash value earns interest based on market rates or a minimum guaranteed rate.


• Adjustable Death Benefit: Policyholders can increase or decrease the death benefit as their needs change, subject to certain conditions.

Variable Life Insurance

Variable life insurance is a type of permanent life insurance that allows policyholders to invest the cash value in various investment options, such as stocks, bonds, and mutual funds. The death benefit and cash value can fluctuate based on investment performance. Key features include:

• Investment Options: Policyholders can choose from a variety of investment options for the cash value.


• Potential for Growth: The cash value and death benefit can increase based on the performance of the investments.


• Risk: The cash value and death benefit can also decrease if the investments perform poorly.

Variable Universal Life Insurance

Variable universal life insurance combines features of variable and universal life insurance, offering flexible premiums and investment options. Key features include:

• Flexible Premiums: Policyholders can adjust their premium payments and death benefits within certain limits.


• Investment Options: Policyholders can invest the cash value in various options, similar to variable life insurance.


• Potential for Growth and Risk: The cash value and death benefit can fluctuate based on investment performance.

Final Expense Insurance

Final expense insurance, also known as burial or funeral insurance, is a type of whole life insurance designed to cover funeral and burial expenses. Key features include:

• Lower Coverage Amounts: Typically provides smaller death benefits compared to other life insurance policies.


• Fixed Premiums: Premiums remain constant throughout the life of the policy.


• Cash Value: Includes a cash value component that grows over time.