It’s generally the most affordable type of life insurance and delivers a fixed amount of death benefit coverage for a specified number of years (which is known as the “term”). Term Life Insurance is ideal for covering temporary needs like paying off a mortgage or other debts in the event of an untimely death.

Term Life insurance can be the best option if your budget will not allow you to purchase more expensive permanent insurance, yet you need to cover certain debts and expenses in case of your untimely death. Many term policies have the option of “conversion” which allows you to convert the term policy into a permanent policy at a later date.

Term Life Insurance Basics

• Provides coverage for a specified period
• Easy to understand
• Affordable way to get maximum coverage
• Becomes expensive after the specified period
• You build no equity

While Term Life can be described as a base model of life insurance, Permanent Life insurance provides flexibility along with coverage for longer-range goals. In addition to covering current debt and expense or replacement of income Permanent Life Insurance is a great tool to help provide coverage for college funding, supplemental retirement income, charitable giving and leaving an inheritance for your heirs.

Also, Permanent Life insurance offers the opportunity to build tax-deferred cash value that you can access for future use.

Permanent Life Insurance Basics

• Protection for your whole life, as long as sufficient premiums are paid
• Can build equity in the form of a cash value
• Offers flexibility and many options to choose from
• Initially higher premiums than Term, but generally more cost-effective in the long run

The two most common types of Permanent Life Insurance are Whole Life Insurance and Universal Life Insurance.

Whole Life Insurance is the simplest form of permanent life insurance. It features lifelong protection with guaranteed premiums, death benefit, and cash value.

You should consider Whole Life Insurance if you want:

• Guaranteed Death Benefit
• Fixed Premiums
• Cash Value Guaranteed to grow each year
• Dividends to be used to increase policy value

Some aspects to consider when thinking about Whole Life Insurance:

• Premiums are initially more costly than Term Life, but are guaranteed not to increase
• Dividends are not guaranteed
• Loans and withdrawals can reduce the death benefit payout

Universal Life insurance has more features than Term Life that allows for great flexibility than Whole Life Insurance. For example, Universal Life Insurance has features like flexible premium payments and allows you to change death benefit.
You should consider Universal Life Insurance if you want:

• Protection that can last a lifetime
• The flexibility to choose between two structure of policy
  • Protection plus cash accumulation
  • Affordable guaranteed protection

Some aspects to consider when thinking about Universal Life Insurance:

• Cash value growth is based on periodically-declared fixed interest rates. If the interest rates fall, your cash value could suffer, and higher premiums may be needed
• Changing your policy's premium or death benefit can affect your policy's performance and guarantees, possibly requiring higher premiums later.

Variable Life Insurance combines the protection and tax efficiencies of life insurance with the investment potential of market gains. The life insurance aspect provides death benefit coverage, while the variable aspect allows the policy’s cash value the opportunity to increase as it participates in investment sub-accounts. A sub-account acts similar to a mutual fund, except it's only available within a variable life insurance and annuity policy

It is important to note that because Variable Life Insurance is subject to market returns and investment risk your principal is not guaranteed.