Types of Life Insurance

There are two major types of life insurance – term and whole life.

Term insurance provides you with a fixed benefit amount, such as $500,000, that the insurance company will pay your beneficiaries at the time of your death. Term insurance provides coverage for a fixed amount of time, such as 20 or 30 years, as long as the premium payments are maintained. The insurance company cannot raise premiums or cancel coverage once issued regardless of health issues. However they can, and will, cancel coverage if the premium payments are not made.

Whole life insurance is a blend of a fixed coverage amount with a portion that is paid into a separate account. The concept is over time, the account will provide a cash benefit that will cover the fixed insurance premium. The advantage of whole life insurance is that it truly can provide a lifetime benefit. Whole life insurance generally costs more than term insurance because of the cash value component.