The types of life insurance, explained

There are two families of life insurance. Term life covers you for a set number of years and then ends; permanent life covers you for life and builds a savings component called cash value. Permanent coverage comes in several designs, mainly whole life, universal life, indexed universal life and variable universal life, which differ in what is guaranteed and how much risk you carry.

Most other names you'll hear, such as final expense, no-exam, mortgage protection or group life, describe a size, a way of underwriting or a way of buying one of these policies, not a separate kind of insurance.

The types at a glance

Term life insurance

Term life insurance pays only if you die during the term. It has no cash value, which is why it is the cheapest way to buy a large death benefit. Variations include:

• Level term, where the premium and death benefit stay the same for the whole term. This is what most people buy.
• Decreasing term, where the death benefit shrinks over time, often to track a mortgage. See level term vs decreasing term life insurance.
• Annual renewable term, which starts cheap and reprices every year as you age. See Annual renewable term (ART) life insurance.
• Return of premium term, which refunds your premiums if you outlive the term, at a much higher price. See return of premium term life insurance: is it worth it.

Most level term policies let you convert to permanent coverage without new medical questions, up to a deadline set in the policy. That conversion right matters if your health changes. how term life insurance works covers term in depth.

Whole life insurance

Whole life insurance has a fixed premium, a guaranteed death benefit and cash value that grows on a guaranteed schedule. Policies from mutual companies are usually participating, meaning they may pay dividends, which are never guaranteed but can buy additional coverage or reduce premiums. You can borrow against the cash value, and the policy's guarantees are the most complete of any type.

The trade-off is price: whole life costs many times what term costs for the same death benefit, and cash value builds slowly in the early years. Versions include limited-pay policies that are fully paid up after 10 or 20 years, or at age 65, and single-premium policies. See how whole life insurance works and whole life dividends: how participating policies pay.

Universal life and its variants

Universal life insurance separates the policy into a cash value account and monthly charges. Your premiums go into the account, the insurer credits interest, and it deducts the cost of insurance and fees each month. You can pay more, less or skip payments, as long as there is enough in the account to cover the charges. That flexibility is also the main danger: underfunded policies can lapse late in life, when coverage is hardest to replace. See how universal life insurance works and why universal life policies lapse, and how to prevent it.

• Guaranteed universal life (GUL) strips out most of the cash value and guarantees the death benefit to a chosen age if you pay the scheduled premium on time. It is usually the least expensive way to buy permanent coverage. See guaranteed universal life: permanent coverage without the cash.
• Indexed universal life (IUL) credits interest based partly on a stock market index, subject to a cap on gains and a floor, usually 0%, against losses. It is often marketed as a retirement tool, and the illustrations used to sell it rest on non-guaranteed assumptions. See Indexed universal life (IUL) explained and IUL pros and cons: what the sales pitch leaves out.
• Variable universal life (VUL) lets you invest cash value in subaccounts similar to mutual funds. You keep the market upside and the market risk. Because it is a variable product, it is also a security, sold with a prospectus by agents with a securities license. See Variable universal life (VUL) insurance.

Small policies for final costs

Final expense insurance is small whole life coverage, often $50,000 or less, marketed to older adults to pay for a funeral and final bills. It may be simplified issue (a few health questions, no exam) or guaranteed issue (no health questions). Guaranteed issue policies usually have a graded death benefit, paying only a return of premiums plus interest if death from illness occurs in the first two or three years. See guaranteed issue life insurance: no health questions, with limits and graded death benefits: why the first two years matter.

Policies that cover two people

• Survivorship (second-to-die) life covers two people and pays after the second death. It is mostly used in estate planning. See survivorship (second-to-die) life insurance.
• Joint first-to-die life pays at the first death, sometimes used by couples or business partners. See joint first-to-die life insurance.

Coverage through work or a group

Group life insurance through an employer is usually term coverage, often free up to a basic amount with the option to buy more. It is convenient and needs little or no underwriting, but the amount is limited and it usually ends or must be converted when you leave the job. See group life vs individual life insurance.

Products that look like life insurance but aren't the same

• Accidental death and dismemberment (AD&D) pays only for covered accidents, not illness. See Life insurance vs AD&D insurance.
• Mortgage protection insurance is usually decreasing term, sometimes paid to the lender. A regular term policy often does the same job more flexibly. See mortgage protection insurance vs term life.
• Credit life insurance pays off a specific loan if you die. See credit life insurance: what it is and when it's worth it.

What Americans actually buy

According to LIMRA's 2025 annual sales results, released in March 2026, U.S. individual life insurance new annualized premium reached a record $17.5 billion in 2025. By product, whole life accounted for 37% of new premium, indexed universal life 25%, term 17%, variable universal life 15% and fixed universal life 6%.

Those are shares of premium, not of policies. Term policies cost far less each, so term's 17% share of premium represents a much larger share of the people buying coverage.

How to choose among them

1. How long does the need last? If it ends, such as when the children are grown or the mortgage is paid, start with term. If it lasts for life, look at permanent options. term vs permanent life insurance: the core trade-off walks through this.
2. What can you afford to pay for decades? A permanent policy you drop after a few years usually returns far less than you paid. Buying more term than you can sustain is rarely a problem; buying more permanent than you can sustain often is.
3. How much risk will you carry? Whole life and GUL put the risk on the insurer. Universal, indexed and variable policies shift more of it to you.
4. What does your health allow? Healthy applicants get the best prices from fully underwritten policies. Simplified and guaranteed issue cost more per dollar of coverage and are best kept as a fallback.

The which type of life insurance fits me? asks these questions and points to the types worth pricing. For the most common head-to-head decision, see term vs whole life insurance: which fits you.

Key takeaways

• Life insurance comes in two families: term, which covers a set period, and permanent, which covers you for life and builds cash value.
• Permanent designs differ mainly in who carries the risk: whole life and guaranteed universal life are the most guaranteed; indexed and variable universal life shift risk to you.
• Final expense, no-exam, group and mortgage protection policies are ways of sizing, underwriting or buying coverage, not separate kinds of insurance.
• Match the policy to how long your need lasts and what you can afford to pay for as long as you need it.