The two main types are term life and permanent life. Term covers you for a set number of years. Permanent can last your whole life and may build cash value.
Term life covers you for a set time, like 1 year or 5 to 30 years. It pays only if you die during that time. Level term pays the same amount the whole time. Decreasing term pays less as the years go by.
Whole life is a kind of permanent insurance. It stays in force your whole life as long as you pay. The premiums, death benefit, and cash value are guaranteed.
Universal life is also permanent, but more flexible. You can change your premium and death benefit. If the cash value runs out, the policy can lapse.
Some universal policies tie growth to a stock index like the S&P 500. Variable universal life uses investment accounts that can go up or down.
Group life comes through a job, union, or church. It often pays one or two times your yearly salary. It usually ends when you leave the job.
- Term life
- Whole life
- Universal life
- Variable universal life
- Group life through work
More questions
Which type costs less?
Term life costs less at first. Permanent life costs more because it lasts longer and has a savings part.
Can I switch from term to permanent later?
Many term policies are convertible. Texas says companies usually let you convert until about age 65, with no medical exam.
What is credit life insurance?
It pays off a loan if you die before the loan is paid. If you already have life insurance, you may not need it.
Words to know
- Cash value
- The savings part of a permanent policy. It grows over time and can be used for loans, cash, or to pay premiums.
- Decreasing term
- Term insurance where the death benefit goes down over the term while the premium stays the same. It is often sold as mortgage protection.
- Group life
- Life insurance offered by an employer or group to its members. You usually don't have to answer health questions, and coverage often ends when you leave.
- Lapse
- When your policy ends because you did not pay the premium in time. Your beneficiaries will not get the death benefit.
- Level term
- Term insurance where the death benefit stays the same for the whole term.
- Premium
- The amount you pay an insurance company for your policy.
