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You know life insurance is important, and you're ready to buy coverage. But with so many life insurance policies out there, that's not always easy. 

Some policies protect you for a set number of years, while others can last the rest of your life. Some are simple and affordable, and others are complicated and expensive. Here's everything you need to know about the different types of life insurance policies, how they work, and what they cost. 

Read more: Best life insurance companies of 2026

Pros

Cons

Less expensive than permanent life insurance

Coverage ends if you outlive the term, with no payout

Predictable premiums and death benefit

No cash value builds up

Can convert to permanent insurance later without a health check

Renewed/converted premiums are usually higher

Optional return-of-premium plans refund what you paid

Return-of-premium plans cost more, and missed payments can cancel coverage

Term life insurance provides coverage for a specific period, usually 10, 20, or 30 years. If you die while the policy is active, the insurer pays the death benefit to your beneficiaries. If you outlive the term, coverage generally ends, and you don't receive any money back.

Most people buy level term insurance, which keeps the premium and death benefit steady during the life of the policy. 

Term life insurance tends to be much cheaper than permanent life because it's temporary and doesn't build cash value. 

A healthy 30-year-old nonsmoking woman would pay about $37 a month for a $1 million policy with a 20-year term, according to Policygenius. A man of the same age and health would pay about $49. Smokers can expect to pay roughly three times as much.

The main drawback of term life policies is that coverage might end when you still need protection. Some policies allow you to convert to permanent insurance. This feature lets you renew the policy without having to prove you're still in good health. You can continue to renew up to a set age limit, but the renewed premium will almost always be higher.

Coverage also ends if you stop paying the premiums and don't catch up during the policy's grace period. There's no refund if you cancel the policy or outlive its term. 

One exception is return-of-premium term policies. These refund some or all of the premiums you've paid if you survive the term. However, you'll pay more than standard term life insurance for this type of coverage. 

Pros

Cons

Lifelong coverage as long as premiums are paid

Premiums are substantially higher than term life

Builds cash value you can draw from or borrow against

Complicated — fees and terms vary by policy type

Good fit for lifelong needs (e.g., a disabled dependent or estate planning)

Experts say the expense is often not worth it (investing or saving might be a better choice)

Permanent life insurance provides lifelong coverage as long as you keep up with premium payments. 

Unlike term life insurance, which is relatively straightforward, permanent life insurance includes several sub-types, including whole life, universal life, and variable life. 

Permanent life costs substantially more than term life coverage, often several thousand dollars a year more. 

Premiums are higher partly because the coverage can last longer and partly because a portion of each payment is often diverted to a separate cash value account you can draw from or borrow against. 

These policies can be complicated: Guarantees, fees, interest credits, investment performance, and premium flexibility vary widely.

Because they're expensive, permanent life insurance policies usually aren't the best choice for someone who simply wants to replace income for a certain amount of time, said Tony Steuer, author of Insurance Made Easy and a financial readiness advocate in Alameda, California.

With few exceptions to the rule, Steuer says pricey permanent life insurance "doesn't really make sense for pretty much anyone," but especially people with more limited income. 

"That extra money spent on a permanent policy versus a term life policy could be taking care of their savings, their emergency fund, their retirement planning — whatever their other goals are," he said.

However, Steuer added that permanent policies can make sense for people who will always need life insurance, such as parents who want to provide lifelong support for a child with disabilities or high-net-worth families planning for estate taxes.

Learn more: Is life insurance taxable? Here's when you have to pay.

Pros

Cons

Fixed premium for life 

More expensive than term (roughly 6-10 times more for the same death benefit)

Guaranteed death benefit for beneficiaries

Cash value builds slowly, especially in early years

Cash value grows steadily and predictably

Cancelling early can trigger surrender charges that reduce what you get back

Good fit if you want lifelong coverage and stability over higher potential returns

Lower growth potential compared to other permanent policy types

Whole life insurance is the most straightforward type of permanent coverage. You generally pay the same monthly premium for life, your beneficiaries receive a guaranteed death benefit when you pass away, and the policy gradually builds cash value over time. 

The biggest trade-off is cost. Whole life premiums can be roughly six to 10 times higher than term premiums for the same death benefit, according to Guardian Life, a major life insurer. Cash value also tends to build slowly at first, and surrender charges can reduce what you receive if you cancel early.

Whole life insurance can be a good fit if you want lifelong coverage, fixed premiums, and a cash value with steady, predictable growth instead of higher potential returns.

Read more: Term vs. whole life insurance: Which should you choose?

Type

Pros

Cons

Universal Life

Flexible premiums and death benefit

Cash value earns interest

Underpaying can drain cash value and cause lapse

Fees and mortality charges rise over time

Indexed Universal Life (IUL)

Cash value linked to market index growth

Tax-deferred

Good fit for high earners

Gains aren't direct market investment

Caps/fees limit upside

Hard to predict returns

Variable Life

Investment subaccounts offer market growth potential

Generally guarantees a minimum death benefit

Fees

Performance isn't guaranteed

Less premium/death benefit flexibility than VUL

Variable Universal Life (VUL)

Investment subaccounts for growth potential

Adjustable premiums and death benefit

Often no guaranteed minimum death benefit

Poor investment performance can require higher payments to avoid lapse

Universal life offers more flexibility than whole life. Depending on the contract, you might be able to adjust the premium or death benefit. 

Part of the money you pay into the policy goes toward fees and insurer costs. Any money left over is added to the policy's cash value, where it can earn interest over time.

While universal life policies offer flexibility, paying too little can drain the account's cash value and cause your policy to lapse. The insurer can also increase expenses over time, and mortality charges rise as you age. 

Under the universal life umbrella, two other types of life insurance exist: indexed and variable. These terms describe how the value of your cash account grows. 

Read more: What is universal life insurance?

Indexed universal life, or IUL, credits interest to your cash account based partly on a market index, such as the S&P 500. However, your cash value isn't invested directly in the stock market. Instead, the insurer uses the index's performance to calculate how much interest to credit to your account.

IUL is often pitched as a way to capture some stock-market growth without losing money during a downturn. But the reality is murkier. 

A floor can prevent a negative index return from being credited to the account, but insurance charges can still eat away at the account's returns. Insurers can also limit your upside through caps, participation rates, and other contract rules.  So many moving parts can make it difficult to understand how your cash value will actually rise or fall with the index.

IUL is a niche product often used by wealthier individuals who've already maxed out 401(k) or IRA contributions and want another tax-deferred way to grow their retirement savings. 

Variable universal life lets you allocate your cash value to investment subaccounts, so the account can rise or fall with market performance. It basically gives you more investment options than IULs while providing adjustable premiums and death-benefit features.

Like IULs, variable life policies contain layers of fees, and their future performance isn't guaranteed. Traditional variable life policies generally guarantee a minimum death benefit, but variable universal life policies may not, so subpar investment performance could force you to pay substantially more to prevent the policy from lapsing.

Pros

Cons

Easier to qualify for: only a health questionnaire with simplified issue, while guaranteed issue requires no health questions or exam at all

Expensive; may pay more in premiums over time than a funeral would cost

Covers funeral and end-of-life costs specifically

Small death benefits ($5,000-$25,000) compared to typical life insurance

Simple to understand and set up

Waiting periods (2–3 years) mean insurer may not pay full death benefit if you die within that time

Final expense insurance is usually a whole life policy with a small death benefit marketed to older adults who want to cover a funeral or other end-of-life costs. Death benefits often range from $5,000 to $25,000 — a fraction of what typical life insurance policies offer. 

They're appealing because these policies are easier to qualify for than traditional life insurance. Simplified-issue skips the medical exam, opting instead for a simple health questionnaire. Some final expense policies are guaranteed issue, meaning you can qualify without an exam or health questions.

But there are drawbacks. "It's relatively expensive on a dollar-for-dollar basis of coverage," said Steuer. 

Some policies also have a two- or three-year waiting period, so if you die from natural causes during that time, the insurer won't pay the full death benefit. Instead, it'll usually return the premiums you've already paid, plus a small amount of interest.

"These policies tend to be marketed to people with lower incomes," said Steuer. "They think they're doing something good for their family. However, it's generally not a good deal for the person buying the insurance." 

According to the Washington Office of Insurance Commissioner, over time, you might end up paying more in premiums than the actual cost of a funeral.

Some policies don't fit neatly into the categories above, but they're worth exploring if their structure matches your specific need or situation. 

Type

Pros

Cons

Group or Employer Life

Often free basic coverage as a low-cost supplemental option

Little or no medical underwriting

Limited coverage that typically ends when you leave your job

Portability options cost more

Joint Life

Covers two people under one policy

First-to-die can help a surviving spouse with shared debts/lost income

Second-to-die is useful for estate planning or lifelong dependents

Can be hard to find as not all insurers offer it

Some only sell permanent versions

Group life insurance is offered through an employer, often with basic coverage at no cost and optional supplemental coverage at a low cost. Enrollment may require little or no medical underwriting.

There's a decent chance your job offers this kind of coverage. About 43% of employers offered life insurance to employees, according to a 2025 survey by the Employee Benefit Research Institute and Lincoln Financial. 

Group coverage is convenient, but it might not meet your family's needs, Steuer said. "Most employers provide 1x salary, sometimes 2x salary, so it's not a lot of coverage." In contrast, 10-15x your annual salary is often cited as an appropriate amount of life insurance coverage. 

However, the biggest downside is that employer-sponsored coverage often ends when you leave your job. Some policies offer portability, so you can take your coverage with you, but you'll typically pay a higher premium if you choose this option. 

Joint life insurance covers two people with one contract. A first-to-die policy pays upon the death of the first insured person. A second-to-die, or survivorship, policy pays only after both insured people die.

First-to-die coverage can help the surviving spouse pay for shared debts or lost income, while survivorship insurance is more commonly used for estate planning or a lifelong dependent. 

Joint life insurance can be hard to find. Not every insurer offers it, and some sell only permanent joint life policies. 

The right type of life insurance depends on what the policy needs to cover and how long that financial need is expected to last. Someone with young children and a mortgage has different coverage needs than a retiree with little debt. 

"What you're paying in premiums should be a huge consideration," said Steuer. 

Your budget matters as much as policy features. Affordable term coverage with premiums you can actually keep up with for decades serves you better than pricy permanent coverage you surrender after a few years because premiums are too expensive. 

If cost is a concern, one option is buying several inexpensive term policies with different end dates. For example, consider a 10-year policy providing coverage until kids graduate from college and a 30-year policy supporting a spouse until he or she starts collecting Social Security. 

Steuer is a fan of laddering term life policies: "It's one of the best strategies you can do with your life insurance."

"Laddering is smart because you can just terminate the policies as that need expires," he added. "If you're young and healthy, you can get multiple term policies very cheap — much cheaper than a single permanent life policy."

Everyone's situation and insurance needs are different, so speaking with a third-party financial advisor (not one associated with an insurance company) can help you pick the right type for your situation. 

Read more: How much life insurance do I need? A guide for every life stage.

Term insurance is generally cheapest, while permanent policies cost more. Remember, whole life premiums can be roughly six to 10 times higher than term premiums for the same death benefit. 

So if a 45-year-old man pays $50 a month for a term-life policy, that same person might pay $300 or more a month for a whole life policy. 

However, the cost of life insurance depends on more than the policy type. It's also impacted by factors such as:

Age

Health history

Tobacco or nicotine use

Sex or gender

Coverage amount and term length

Occupation, driving record, and risky hobbies

How your premium is structured also plays a role. Level term premiums stay fixed during the selected term but often jump if you choose to renew coverage. Whole life premiums are generally fixed. Universal life premiums can be flexible, but rising insurance charges or weak cash-value performance can require additional payments.

Ultimately, the best policy isn't necessarily the one with the most bells and whistles. It's the one that provides enough protection when your family needs it most. 

Read more: Your complete guide to life insurance

Term life insurance accounted for the largest share of new coverage issued in 2024, representing about 72% of the total face amount issued, according to the American Council of Life Insurers' 2025 Life Insurers Fact Book.

About 55% of working adults reported having life insurance through an employer, according to the 2025 Insurance Barometer Study from LIMRA and Life Happens.

Yes. You can combine employer coverage with an individual policy, for example, or buy multiple term policies with different expiration dates. This strategy can provide more coverage when children are young, then reduces as debts shrink and savings grow. 

Permanent policies build cash value. You can usually withdraw or borrow against this money, but doing so can reduce the death benefit, increase premium payments, or create tax consequences, so review the contract carefully.

Which life insurance is better for your needs — term or whole life? Learn more about the costs and benefits of both types and how to make the right choice.

Wondering how to get cheap life insurance? Learn which type is cheapest, what affects your premium, and how to get the best coverage for your budget.

Not sure how much life insurance you need? Learn how much coverage you need based on your income, debts, and life stage — plus three methods to calculate the right coverage amount.

Learn about the best life insurance companies, like New York Life and MassMutual, to find the right policy to fit your specific coverage needs and requirements.

Learn more about how taxes apply to life insurance proceeds and when you do (and don't) have to pay taxes on life insurance.

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