There are two major types of life insurance. Term Life Insurance and Permanent Life Insurance.
- Term insurance specifies a time period in which an amount of *premium will provide an amount of *death benefit.
- Permanent insurance is traditionally structured with a death benefit that does not expire and builds *cash value.
*Definitions: Cash value means cash amount that the policy is worth. It’s like a savings or investment account within a life policy. Premium is your insurance bill amount. Death Benefit is the amount paid by the insurance company if you have a valid death claim.
However, there are subtypes within Term Life Insurance and Permanent Life Insurance which enable a life insurance applicant to customize coverage.
Within Term Life Insurance:
- Level Term Insurance: Level premiums with a death benefit for a specified number of years.
- Term Return of Premium Insurance: The same as level term insurance but some or all of your money is returned at the end of the term period.
Within Permanent Life Insurance:
- Universal Life Insurance: Nicknamed adjustable life insurance, it allows flexibility with the death benefit and premiums, and the cash value may fluctuate depending on market conditions.
- Whole Life Insurance: Pay level premiums and the death benefit covers your whole life, and the cash value builds at a specified rate. It is like a guaranteed version of Universal Life Insurance.