Term Life

• Term life insurance is the most basic life insurance contract. You pay a premium and you receive a guaranteed death benefit for as long as that premium is paid. When you stop paying the premium, you stop receiving the insurance. Term policies are also relatively cheap when comparing the premium you pay in proportion to the death benefit you receive. You may purchase this policy type for a term up to 30 years. This means the policy is really best if you only need insurance for a fixed period of time. Examples of this would be if you need life insurance to cover a mortgage loan.
  
  

Whole Life

• Whole life insurance charges a higher premium than term life, but extends coverage out to your age 100. This coverage won't be canceled unless you fail to pay premiums on the policy. In addition to a death benefit, you receive a cash reserve, called a cash value. This cash value is a savings you may use during your lifetime for any reason. This policy is best when you want or need lifetime coverage and want to build a savings along with your death benefit.
  
  

Variable Life

• A variable life insurance policy lets you direct a portion of the premium you pay towards mutual funds. The mutual funds you choose affect the portion of your cash value and death benefit associated with that premium payment. As such, a portion of your policy's death benefit and cash value fluctuate up or down according to the performance of the mutual funds in the policy. This policy is best when you are willing to give up some of the guarantees of whole life in exchange for higher potential interest crediting.
  
  

Universal Life

• Universal life is, by far, the most complex insurance choice. This policy allows maximum flexibility. The policy's death benefit may be set to stay flat for the entire policy term or it may be set to increase over time. Additionally, the amount of insurance you purchase can be increased or decreased. Premium payments may be adjusted upward within certain limits and down to the point where you are paying no premiums at all. Like whole life and variable life, the policy contract builds a cash value savings. The death benefit normally extends out to age 120, though this depends on the issuing insurer. The death benefit is a term life policy that renews every year. Because of this, the policy's death benefit is paid out of the cash value. As long as there is cash value available to pay the premiums, your insurance stays in force. When there is no cash value, the policy terminates. This is why premiums are not strictly required every month. This policy is best when you want total control over the policy's premium and death benefit functions. However, the costs of the universal life insurance policy are variable. The insurer sets a maximum insurance charge. If your insurer increases the policy's costs too high and the interest credited to the policy is insufficient to pay the costs, you will start losing cash value, and the policy could eventually lapse.