Types of Life Insurance

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.

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