The most common types of life insurance are term life insurance, whole life insurance, and universal life insurance.  

Term Life Insurance – As we’ve already mentioned, term life insurance provides coverage for a fixed amount of time. Terms usually range between 10 and 40 years. If you were to pass during your policy’s term, your beneficiaries will receive a cash payout from your insurance company. If it expires before your death, your beneficiaries will not receive a payout. Many companies provide an opportunity to convert a term life insurance policy to a whole life insurance policy when it expires, while others may give you the option to renew it upon expiration. But it’s important to do your research because not all term life insurance companies provide these options. 

Whole Life Insurance – Also is a type of permanent life insurance. As the name indicates, whole life insurance lasts your entire life. As long as you continue to pay your premiums, you’re covered, and your beneficiaries will receive a payout upon your death. Oftentimes, this kind of policy has a “cash value” component. This is a portion of your premium payment that’s put into a savings account and accrues interest and grows tax-free. Cash value acts as a living benefit – a policyholder can access it during their lifetime should they need to. You can access your policy’s cash value in one of four ways: 

• Borrow against the cash value with a loan 
• Make a withdrawal — it has to be less than the mount you have paid, or it will be taxed as income 
• Do a partial surrender (diminishining the death benefit) or a whole surrender of your policy (sell back your policy, terminating it) 
• Use it to pay your premiums 

Universal Life Insurance (UL) – This is another type of permanent life insurance with an investment savings element, though it offers more flexibility than regular whole life insurance. A UL policy’s premiums can be raised or reduced, within limits — meaning you can pay less than or more than your premium amount – and death benefits can be adjusted as well. Excess premiums are added to the policy’s cash value. For this reason, a UL policy can end up costing less than whole life insurance. Unfortunately, premiums do increase as you age and with the investing element of its cash value component, growth is not guaranteed.  

For many, term life insurance provides sufficient coverage and is probably the most budget-friendly option because of its fixed terms. But it’s not for everyone.  

It’s great if you: 

• Want a policy only for a specific (short) amount of time 
• Don’t see it as an investment 
• Need affordable coverage

Just like any other type of life insurance, term life insurance gives beneficiaries a payout if the policyholder dies.  

What makes it unique is that the payout is only given if the insured person passes away during the specific policy timeframe. 

Term life insurance rates are calculated by several factors. Usually, the healthier and younger you are, the lower your rate will be.  

Here are some factors that can affect your rate: 

• Age 
• Gender 
• History of substance abuse 
• Overall health (current and past) 
• Smoking history 
• Having risky hobbies such as scuba diving or skydiving 
• Health history of your immediate family

A beneficiary is a person listed on your policy who collects the insurance money if the insured person passes away.

A death benefit is the payout of the life insurance policy beneficiaries receive upon the policyholder’s death. This amount is equal to the policy coverage amount.

If you need insurance for a relatively short period of time (e.g., a couple of decades), having term life insurance is a great and affordable way to ensure your loved ones will be taken care of.