The biggest difference in life insurance types is the length of time they remain available to you. Term and whole life are the most common distinguishing factors. Here’s a look each.
Term Life Insurance
This type of insurance remains in place for a set number of years as long as you continue to make payments. They range from 1 to 30 years in length. During that time, the amount you pay can change but stays more level overall. You may be able to renew a term policy after it expires or purchase another one. If you die while the policy is in place, the death benefit is paid to your beneficiary at that time. If you do not die during that term, and the policy expires, there is no death benefit paid, and no funds returned to you.
Permanent Life Insurance (whole life and universal life)
A Permanent insurance doesn’t expire but is maintained throughout your lifetime as long as you continue to make payments. Permanent insurance is more like an investment in that you can plan for those funds to go to someone you choose after your death. Whole life insurance policies can also offer more advantages, including potentially paying you dividends during your lifetime or allowing you to borrow from them. Permanent life insurance policies tend to cost more, but they can still be very accessible to most people.
Keep in mind that there are various types of each of these. It’s important to consider your age, your long-term goals, and what you would like these funds to do to determine which is right for your needs.
Buying life insurance young can help to reduce some of the costs you face. It also gives you more access to various versions of life insurance that may fit your needs.