Types of Life Insurance

Compare types of life insurance

See what term and permanent coverage costs for your age and health profile — then pick the type that fits the job.

Term vs. permanent life insurance

Term life covers a defined window at the lowest premium. Permanent life stays in force for life and usually builds cash value. That is the whole decision: how long you need the death benefit, and whether you want the policy to do anything besides pay it.

Term premiums stay level for 10, 20, or 30 years. When the term ends, coverage ends unless you renew at a much higher rate or convert to permanent coverage without a new exam. There is no cash value. You are paying for a death benefit during the years your income or debt creates a real coverage need.

Permanent life costs more because the carrier is pricing lifetime risk, not a fixed term. Whole life, indexed universal life, and universal life can build cash value you borrow against or withdraw. Burial and guaranteed-issue policies are permanent too — smaller face amounts, easier underwriting, higher cost per dollar.

A healthy 40-year-old male in Preferred Plus pays about $28 per month for $500,000 of 20-year term in our March 2026 carrier file. Permanent illustrations sit in a different price band because the carrier expects to pay a claim and is funding cash value — see term rates by age and whole life rates by age for the charts, then run your own numbers above.

Types of term life insurance

Term life buys the most death benefit per premium dollar because it only covers a set period. If you outlive the term, the policy expires with no payout and no leftover value.

• 20-year term: The most common length. It covers a typical mortgage and the years children are financially dependent. See 20-year term for how that window is priced.
• 30-year term: Locks today's rate from early career through near-retirement. Premiums run higher than 20-year because the carrier is on the hook longer. Best when you buy in your 30s and want income replacement into your 60s. 30-year term is the longest standard level period.
• 10-year term: The cheapest level period. It fits a defined debt — a business loan, a short remaining mortgage — or bridges you to permanent coverage. 10-year term is a tool, not a default.
• No medical exam term: Accelerated underwriting replaces the blood draw for healthy applicants, often with a decision in 24–72 hours at the same rate class as a full exam. No-exam term still asks health questions and pulls records.
• Return of premium term: Refunds premiums if you outlive the term. The extra cost is real — run the math before you pay for a refund you may never need. Return of premium is a rider on term, not a separate category.

Most term policies include a conversion privilege: the right to move to permanent coverage without a new medical exam, even if your health has declined. Conversion windows are limited — often the first 10 to 20 years of the term, or before a stated age. If you develop a serious condition during the term, that option may be the only way to lock lifetime coverage.

Types of permanent life insurance

Permanent life insurance stays in force for life and typically builds cash value. You pay more than term because the death benefit is designed to pay eventually, and part of the premium funds the cash account.

Whole life offers guaranteed premiums, guaranteed cash value growth, and — on participating policies from mutual carriers — dividends you can take as cash, reduce premiums, or buy paid-up additions. Cash value grows on a schedule in the contract. Some policies are structured for infinite banking: policy loans finance large purchases while the cash value keeps growing. See whole life cash value for how that account actually works.

Indexed universal life ties crediting to a market index such as the S&P 500, with a 0% floor and a cap on upside. You do not own shares. The carrier credits interest based on index movement. IUL is used for tax-advantaged retirement income via policy loans when the policy is designed and funded for that job — it is not a market investment, and illustrations are not guarantees.

Universal life uses a flexible premium and a declared interest rate set by the carrier. You can raise or lower premiums within limits. If cash value drops too low to cover internal charges, the policy can lapse. Traditional UL has lost ground to IUL as declared rates fell.

Variable life puts cash value in stock and bond sub-accounts with no downside floor. Cash value and death benefit can fall. We do not lead with this product for buyers who want predictable protection.

For a deeper breakdown of guarantees versus flexibility, see permanent life insurance.

Simplified issue and guaranteed issue life insurance

Not every policy requires a paramedical exam. Simplified issue and guaranteed issue trade easier approval for smaller face amounts and a higher cost per $1,000 of coverage.

Simplified issue asks a short health questionnaire — usually 5 to 10 questions — with no exam. Carriers often pull prescription history. Face amounts typically run $50,000 to $250,000 depending on age. Burial insurance is usually simplified-issue whole life sized for funeral costs and unpaid medical bills, not income replacement.

Guaranteed issue asks no health questions and requires no exam. Approval is automatic within issue-age limits. Face amounts are small — often $5,000 to $25,000 — premiums are high, and most policies grade the death benefit for two years: natural death in that window returns premiums paid, not the full face amount. Accidental death is usually covered immediately. This is the last-resort path when serious health conditions close every other door.

Do not buy guaranteed issue if you can still answer health questions honestly and qualify for simplified issue. The price gap is large and the waiting period is real.

Other types of life insurance

A few products sit outside the everyday term-versus-permanent choice.

Group life through an employer is usually a multiple of salary, cheap or free, and ends when you leave the job. Treat it as a supplement. Do not size your family's plan around coverage you lose at a layoff or a career change.

Survivorship life covers two people and pays at the second death. Couples use it for estate-tax liquidity and legacy planning — not income replacement for a surviving spouse, because the claim waits until both insureds have died.

Decreasing term shrinks the death benefit over time, often to match a falling mortgage balance. Level term is usually cleaner: the need may not fall as fast as the schedule, and conversion options are stronger on level policies.

Which type of life insurance do you need

Pick the type from the job, not from a product brochure. Income replacement for a set number of years is a term job. A death benefit that must still be there at 80 is a permanent job. Wanting both is common — many families carry a large term policy for the working years and a smaller permanent policy that never expires.

Use the life insurance calculator to size the death benefit before you argue about type. A $250,000 permanent policy does not replace a $1 million income-replacement need. Type and amount are separate decisions. For how premiums are built, see life insurance cost.

How to choose the right type

The right type of life insurance comes down to three questions: how long you need coverage, whether you want the policy to do anything besides pay a death benefit, and how much premium you can keep paying.

1. Name the job. Income replacement, mortgage payoff, business loan, estate liquidity, funeral costs, or cash-value accumulation. One policy can do one primary job well.
2. Set the end date. If the need ends, buy term that covers that window with a little margin — 20-year for a 15-year remaining mortgage, not 10-year to save a few dollars.
3. Decide if cash value earns its keep. If you will not use loans, paid-up additions, or lifetime coverage, do not fund them.
4. Pick the underwriting path you can actually pass. Full underwriting prices the most coverage. Health conditions may push you to simplified or guaranteed issue — that is a type decision, not a brand decision.
5. Quote term and permanent on the same profile. An independent agent can show both. A captive agent can only show what their company sells.

Riders change a base type at the margin — waiver of premium, child term, accelerated death benefit, conversion. Add them when they match a real risk. See life insurance riders for which ones earn the extra premium.

Common mistakes when choosing a type

Buying permanent when term would have done the job is the expensive mistake. Whole life and IUL cost several times more than term for the same death benefit. If your only goal is income replacement during working years, you are paying for features you will not use.

Buying term when you need lifetime coverage is the other side. If the death benefit still has to be there at 70, a 20-year term bought at 50 expires or renews at a price that rarely makes sense. Locking permanent coverage while you are younger and healthier is how that benefit stays in force.

Assuming every term quote is the same leaves money on the table. The same 40-year-old can land Preferred Plus at one carrier and Standard at another. Shopping one company is not shopping types — it is shopping a product line.

Letting a conversion window close after a health change is hard to undo. If you are diagnosed during the term, convert while you still can. Many people let the term expire and then discover they cannot qualify for new coverage at any useful rate.

Buying guaranteed issue while simplified issue is still available is the last-resort trap. An agent who works high-risk cases knows which carriers still ask questions you can pass.

Conclusion

We see the same pattern on this decision: people pick a type because it is what the last agent sold, then shop rates inside that box. The expensive error is the box. Term and permanent solve different jobs. An independent agent shows both on your age, health, and face amount, then matches the winner to the carrier whose underwriting treats your file best.

If the need has an end date, we start with term length and conversion options. If the death benefit has to last, we illustrate whole life and IUL on the same target so you see guarantees versus crediting before you fund either one. That is the comparison — type first, carrier second.

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Life Insurance

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