Types of Life Insurance

There are different types of life insurance policies. The type of policy you have can effect how much you pay in premiums over time, and if you get any additional benefits. All companies handle their policy's differently, but here is a general description of the two main types of policies:
 

Term Life Insurance- This is the simplest type of policy. The coverage lasts for a set period, so long as you pay the premiums. If a policyholder dies within the time period set by the policy, then the insurance company will have to pay the benefactors the agreed upon coverage amount. Policyholders have the option to renew their policy at the end of each term, usually annually.

 Younger adults can get generous term life coverage for cheap premiums because they are less likely to die suddenly and need the policy amount paid out. Term life insurance premiums get more expensive as people get older as it becomes increasingly more likely that the company will have to pay out the coverage.

Whole-Life Insurance- This is a permanent life insurance policy that provides coverage for death but also an investment fund. This type of policy will pay a clearly stated, fixed amount upon the event of the policyholder’s death. The premiums paid usually stay the same throughout the length of the policy. The part of premium is used by the insurance company to make investments, so the premiums build additional cash value. Policyholders can borrow against the cash value accumulated through the investments.

Reference:

CNN Money. Types of life insurance. Money 101. Retrieved from

         http://money.cnn.com/magazines/moneymag/money101/lesson20/index2.htm