Term life insurance provides coverage for a specific period, or "term," and pays a death benefit to beneficiaries if the insured dies within that term. It is the simplest and often most affordable type of life insurance because it does not build cash value, unlike permanent policies. Policies are typically sold for terms of 10 to 30 years and often have level premiums, meaning they remain the same for the duration of the policy. 

How it works

• Premiums: You pay a regular premium (monthly or yearly) for the duration of the policy's term.
• Death Benefit: If you die during the policy term, your beneficiaries receive a cash payout, known as the death benefit.
• Policy End: Once the term is over, the coverage ends. There is no monetary value or cash payout left to the policyholder, much like a lease on an apartment. Many policies offer options to renew at a higher rate or convert to a permanent policy. 

Common types

• Level term: The death benefit and premiums stay the same for the entire term.
• Decreasing term: The death benefit decreases over the life of the policy, often in yearly increments.
• Increasing term: The death benefit increases over time, with premiums also potentially increasing slightly. 

Why people choose term life insurance

• Affordability: It is generally less expensive than permanent life insurance, allowing for larger coverage amounts for a lower cost.
• Specific needs: It's ideal for covering specific financial needs that have an end date, such as a mortgage, raising children, or college tuition.

Flexibility: It allows you to choose a term that aligns with your specific needs, such as the years you are raising a family or have a large loan to pay off. 

Whole life insurance is a type of permanent life insurance that provides lifelong coverage and a guaranteed cash value component. As long as premiums are paid, the policy will pay a death benefit to beneficiaries whenever the insured dies. A portion of the premiums builds a cash value that grows on a tax-deferred basis and can be accessed during the policyholder's lifetime. 

How it works

• Permanent coverage: Unlike term life insurance, which covers a specific period, whole life insurance is designed to last for your entire life.
• Fixed premiums: You pay a set premium amount for the life of the policy, making it easier to budget.
• Cash value growth: A portion of your premium goes into a cash value account that grows at a guaranteed rate. This cash value is tax-deferred.
• Access to cash value: You can take out loans or make withdrawals from the cash value during your lifetime, though this may reduce the death benefit.
• Guaranteed death benefit: The policy guarantees a payout to your beneficiaries after your death, provided the premiums are paid. 

Key features

• Lifelong protection: The policy remains active as long as premiums are paid, regardless of age or health changes.
• Fixed cost: Premiums are fixed for the life of the policy, making it a predictable expense.
• Cash value accumulation: The policy builds a cash value with a guaranteed growth rate, acting as a savings component.
• Potential for loans: You can borrow against the policy's cash value, though interest is charged and the loan amount is deducted from the death benefit if not repaid.
• Higher cost: Whole life insurance is typically more expensive than term life insurance due to its lifelong coverage and cash value features.