When shopping around for life insurance, it is important to know there are various policy options—and choosing which is right for you will depend on several personal factors and goals you are trying to achieve through purchasing a policy.
The two categories of life insurance are term and permanent. There are several types of life insurance policies that fit into one or even both of these categories. We'll get into those more in the chart below.
Term life insurance is a policy set for a certain term length. They are commonly issued in 5-year increment terms up to 30 years. If the insured passes away during the policy term, then a payout of the policy limit is distributed to the policy’s beneficiaries. Policy coverage limits can vary—some as low as $25,000, although increments of $100k are more common and can be purchased into the millions.
Permanent life insurance policies typically last until your death rather than for a set number of years. Premiums are determined at the time of purchasing the policy and can vary based on age and sometimes even health; however, once the premium is set, it does not change for the life of the policy. The death benefit of the policy also does not change. Permanent life insurance policies can also accrue a cash value that the owner of the policy can withdraw or borrow against.
Group life insurance policies can be either term life insurance policies or permanent life insurance policies offered through a workplace benefits plan or an organization’s benefit plan (e.g., a fraternal organization). The policy premium is often far less because there are often many people purchasing a policy—a group rate is essentially offered, and an employer may also help contribute to the costs of the plan.