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Types of life insurance

Term vs. permanent life insurance

Term life:

  • Provides you with coverage for a specific number of years.
  • Costs more as you get older.
  • Doesn't have a cash value so you can't cash it out.
  • Generally less expensive initially because they usually have no savings feature.
  • Except for people past middle age, term life policies usually offer the best value for your money by giving you the biggest death benefit for your premium dollar. The price of a term life policy increases as you grow older.

Permanent or cash value life (whole life, universal life, variable life):

  • Unlike term insurance, remains in place as long as the premium is paid.
  • The insurer uses part of your premium to set up a financial account that earns interest.
  • Gives you actual dollars you can borrow or withdraw.
  • Costs more at the start of the policy.

There is more to think about than the death benefit when selecting life insurance. If you choose permanent life insurance, be sure to consult a licensed investment or tax adviser for guidance on which policy best fits your risk tolerance and investment objectives.