What are the basic types of life insurance?
There are two basic types of life insurance: term and whole life. Term life insurance is the more basic and popular of the two, but it covers you only for the length of the policy, which can range from 1 to 30 years. With a term life policy, if the person named in the policy dies during the term, the policy pays off. There are two kinds of term life insurance: level term and decreasing term. With level, the death benefit remains the same throughout the term of the policy. With decreasing, the death benefit decreases, typically every year, for the duration of the term. Almost all term life policyholders purchase level term. Whole life insurance is coverage that is in force until you die. You might buy a policy when you’re 40 years old that won’t pay off until 50 years later. A chief distinction between whole life and term life insurance is that whole life consists of two components: the death benefit and a “cash value,” or savings, portion. Because a portion of each premium contributes
