Four Core Types of Life Insurance Explained

Term Life Insurance

Term life offers coverage for a fixed period, typically 10, 20, or 30 years. Premiums are level and usually lower than permanent policies because the insurer isn't building cash value. If the insured dies during the term, the beneficiary receives a death benefit; if the term expires, coverage ends unless renewed or converted.

Whole Life Insurance

Whole life is a permanent policy that guarantees a death benefit and accumulates cash value at a fixed rate. Premiums are higher but remain level for life. The cash value grows tax‑deferred and can be borrowed against, making it a potential savings vehicle alongside protection.

Universal Life Insurance

Universal life blends flexibility with permanence. Premiums can vary within limits, and the policy's cash value earns interest tied to a market index or fixed rate. Policyholders can adjust death benefits and premium payments, though changes affect the cash value and coverage level.

Indexed Universal Life Insurance

Indexed universal life (IUL) links the cash value to a stock market index, such as the S&P 500, while protecting against negative market performance through a floor rate. Premiums and death benefits remain flexible, and the policy offers potential for higher cash value growth than fixed permanent plans, but with more complexity and fee considerations.