There are two major types of life insurance—term and whole life

Think of term life insurance this way: If you rent an apartment, your lease has a term length. You make payments during that time and in return have somewhere to live. A term life insurance policy works in a similar way. Sometimes the term is 10 or 30 years; sometimes it’s up until a certain age, like 80. Paying premiums during the term keeps your policy active and your family covered. If you die during the term, a cash benefit will be paid out. The main takeaway is that your family is protected as long as the policy is active. Term life insurance costs are lower on average than whole life insurance — which is a big advantage. Policies can fit a monthly budget and still offer a high amount of coverage. Term life can fit unique needs at different stages of life. Some families plan it so they only need coverage until a certain age or event — like once all the kids are out of college. A term life policy is more convenient for such life changes. Once the term is complete, you will likely have the option to renew your coverage. The rate may be higher because of older age or health concerns, but you can convert to whole life before the term ends if you want. Some Life Insurance companies offer Living Benefits Rider at no extra cost. Simply put, the living benefits of life insurance is the option for the insured to accelerate portion of their death benefits. You do not have to die to use the money. Whole life insurance is one type of permanent life insurance that can provide lifelong coverage. It provides a variety of guarantees, which can be appealing to someone who does not want any guesswork after buying life insurance. Whole life insurance combines an investment account called “cash value” and an insurance product. As long as you pay the premiums, your beneficiaries can claim the policy’s death benefit when you pass away.

Whole life insurance offers three kinds of guarantees:

• A guaranteed minimum rate of return on the cash value. • The promise that your premium payments will not go up. • A guaranteed death benefit that will not go down.

Some people use the phrase “whole life insurance” very broadly to refer to any type of life insurance that can provide lifelong coverage. However, there are other types of permanent life policies that can provide lifelong insurance. These policies work very differently from traditional whole life insurance and include:

• Universal Life Insurance. • Indexed Universal Life Insurance • Final Expense Life Insurance.

Term Life 3. Universal Life Universal life insurance, also known as adjustable life, allows more flexibility than traditional whole life policies. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in the account, the policyholder will also have the option of altering premium payments—providing there is enough money in the account to cover the costs.

Indexed Universal life insurance, or IUL, is a type of universal life insurance. Rather than growing based on a fixed interest rate, it is tied to the performance of a market index, like the S&P 500. Unlike investing directly in an index fund, however, you will not lose money when the market has a downturn. This is because a guarantee applies to your principal, insuring it against losses. On the other hand, there is usually a cap on the maximum return you can earn. 4. Variable Life Final expense insurance is a type of whole life insurance designed to cover medical bills and funeral expenses when you pass. A final expense policy is also known as burial or funeral insurance and is popular with seniors.