Policy Types

What Are Some of the Types of Life Insurance Out There?

This article outlines the 10 of the most common types of life insurance, from term to voluntary life insurance, to discuss with your financial advisor and to see which one best fits your needs.

10 Types of Life Insurance: Which Flavor is Right For You?

In the old days, coffee was coffee. Now, there's espresso, French roast, Columbian, Americano, latte, cappuccino, and so on. You almost need a dictionary of coffee terms to order what you want. Talking about life insurance can seem that way too. There are almost as many names for life insurance as there are for coffee.

To help you sort it all out, here's a cheat sheet that outlines the 10 most common types of life insurance.

  1. Term life insurance is intended to be used for a limited time, most commonly 10 or 20 years. After the end of the term, most term policies can be extended on a yearly basis, although the premium will increase.
  2. Whole life insurance remains in force as long as the insured lives (and premiums are paid). Whole life insurance comes with guarantees that the premium will never change and that the policy will earn cash value according to the policy schedule.
  3. Permanent life insurance is another term for whole life insurance. Sometimes it is referred to as “cash value insurance.” The cash value of a whole life, or permanent policy, can be borrowed and repaid, which is a popular feature of the whole life insurance policy. Click here to read our article, “Three Reasons to Consider a Permanent Life Insurance Policy.”
  4. Universal life insurance (UL) can be thought of as somewhere between whole life and term insurance. It earns a cash value based on the interest-crediting rate. UL guarantees a maximum cost of insurance and a minimum interest-crediting rate. Another feature unique to universal life is its flexibility. The amount of coverage can easily be increased or decreased, subject to underwriting, to prepare for the unexpected.
  5. Final expense insurance is intended to cover burials costs, medical expenses and other debts. It is usually for smaller face amounts, such as $50,000 or less. Final expense insurance usually doesn't require medical exams or tests and therefore can be more expensive than a fully underwritten policy.
  6. Group life insuranceis most commonly provided as part of an employee benefit package. The employer determines the amount of coverage; often it is a multiple of salary, e.g. two times salary.
  7. Interest-sensitive life insurance is any type of life insurance that earns cash value based on a changing interest crediting rate. Some whole life policies may be interest-sensitive and all UL policies are interest-sensitive. Policies that are interest-sensitive will always have a guaranteed minimum interest-crediting rate.
  8. Variable life insurance has an extra component that offers cash value growth based on designated funds (equity funds, bond funds, etc.). Just as some equities carry additional risk and reward, a variable life insurance policy can be riskier than a traditional whole life policy.
  9. Variable universal life insurance (VUL) is one of the most common types of variable life insurance. There are fewer guarantees in a VUL. If the market takes a downturn, additional premium may be required to maintain the policy. Agents are required to have a special license to sell a variable product.
  10. Voluntary life insurance, like group insurance, is typically a part of an employer's benefit package. Unlike group insurance, voluntary life insurance is owned individually and the applicant chooses the amount of insurance coverage. Voluntary insurance may be whole life, term, or universal life.

Now that you know the 10 main types of life insurance, you're ready to have an informed life insurance conversation with your financial professional. Ask questions! It's important that you know enough to feel comfortable with your decision.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Types of Life Insurance

The article defines the 10 main types of life insurance. It highlights: group life insurance, whole life insurance, and term life insurance among many others. It is easy to be bombarded with terms that can make your purchase decision seem intimidating. You want to buy the right life insurance policy to fit your current needs, while ensuring it's one you can grow into. This article will teach readers about the different types of life insurance.