While there a many different types of life insurance policies, they generally fall into two categories – term and permanent.

Term

Term Insurance is the simplest form of life insurance. It provides financial protection for a specific time, usually from one to 30 years. These policies are relatively inexpensive and are well suited for goals, such as insurance protection during the child-raising years or while paying off a mortgage. They provide a death benefit, but do not offer cash savings.

Purchasing term insurance is like renting a home. It is a short-term solution. Monthly costs are usually lower, but you will not be building equity. Just as many people rent (while saving to buy a home), individuals who need insurance protection now, but have limited resources, may purchase term coverage and then switch to permanent protection. Others may view term insurance as a cost-effective way to protect their family and still have money to put into other investments.

Permanent

Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher. This type of insurance is good for long-range financial goals.

Purchasing permanent insurance is like buying a home instead of renting. You are taking care of long-term housing needs with a long-term solution. Your monthly costs may be higher than if you rent, but your payments will build equity over time. If you purchase permanent insurance, your premiums will pay a death benefit and may also build cash value that can be accessed in the future.