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5 Types of Life Insurance

Life Insurance

There are 5 basic types of life insurance to choose from, which we will explore below. Which one is right for you depends greatly on your financial needs, future plans, and your goals for the policy if and when the time comes when it’s needed.

There are, generically speaking, two basic kinds of life insurance. One is known as term life insurance, and the other is known as permanent life insurance. There are three additional categories of life insurance, which fall under the “permanent” category.

Differences Between Term Life Insurance and Permanent Life Insurance

The basic difference between these two options is that term life is more affordable but only covers you for a specified number of years (as long as you stay current on the payments) before it’s time to renew (often year-to-year) or drop the coverage.

Your rate for the plan once the term has expired may be adjusted due to age and health. Some may be able to convert a term life policy to a whole life insurance option when the term expires. Check the fine print of your policy to learn if this option is available.

Permanent life insurance applies as long as you keep making the payments. There is no term to expire.

Is SGLI Term Life Insurance or Permanent Life Insurance?

Servicemembers Group Life Insurance, Veterans Group Life Insurance, and Family Group Life Insurance are all examples of term life insurance programs offered when you join the military.

Read more: SGLI Pros and Cons

How Permanent Life Insurance Differs From Term Life Insurance

Permanent life insurance, such as whole life insurance, offers coverage for your entire lifetime, as the name implies. You must stay current on your payments to continue coverage but this type of insurance includes a fixed interest rate paid on your insurance policy that creates a cash value over time.

The cash value does not change the death benefit amount, but you will reach a point with the policy (over time) where you can apply for a life insurance loan on that cash value.

If you hold the insurance long enough that the cash value grows to equal the death benefit payout, your insurer may cancel the policy and pay you the amount in cash.


3 Other Types of Life Insurance

The following three types of life insurance all fall under the “permanent” category.

  • Universal life insurance
  • Variable life insurance
  • Final expense life insurance

Universal Life Insurance

Universal life insurance is another option for coverage for your entire life, as long as you continue to make payments.

This option could be marketed to you as “adjustable life insurance” because, depending on the terms of your contract, you may be allowed to change the amount of your death benefit, skip payments, and you may earn interest on your policy over time.

This type of life insurance earning isn’t quite the same as whole life insurance–the universal life insurance rate has a minimum but may be adjustable up or down over time. Your interest rate earnings could build up to the point where you have a no-cost insurance policy that remains active without requiring you to make further payments.

Your experience will vary depending on the service provider, don’t assume the terms and conditions of one policy are identical to others.

Variable Life Insurance

Variable life insurance is described by some sources as “a riskier type” of permanent life insurance.

Why? Because you agree to invest some of your life insurance funds in exchange for a policy designed to pay out more if your investment choices are profitable.

But the investments associated with the policy are not guaranteed, hence the elevated risk. Some may lose a portion of their investment funds; some may profit.

You may not be right for variable life insurance if you don’t feel you know what you’re doing where investments are concerned, or if you aren’t interested in paying closer attention to this type of policy than you would for a term life insurance option.

Funeral Insurance

This is a variation of whole life insurance offering more affordable coverage meant to offset end-of-life costs associated with the funeral, medical bills, or debt.

This type of life insurance coverage may feature fewer or no age or health criteria, making it easier for older people to apply for coverage. But this coverage may not meet larger needs often covered by term life or whole life insurance.


>> Getting affordable life insurance coverage with no medical exam or labs required is easy.  Get a no-obligation, free consultation to determine your eligibility




About the author

Editor-in-Chief | + posts

Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.