Life insurance covers more ground than term and whole life. Different types address different needs, like short-term income replacement, lifelong coverage or end-of-life costs. Some stay affordable with basic coverage. Others build cash value or offer adjustable benefits. The main types and how they work:
Types of Life Insurance
The most common types of life insurance are term, whole, universal, variable and final expense. Specialty options may better suit certain situations.
Find the best type of life insurance for your needs.
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Updated: October 11, 2026
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Key Takeaways
There are several types of life insurance. Each offers different costs, coverage lengths and features.
Specialty types include no-exam, joint, group, mortgage protection, credit, and accidental death & dismemberment life insurance.
There are two main types of life insurance based on coverage length. Term life insurance provides temporary protection, while permanent life insurance offers lifetime coverage.
What Are the Different Types of Life Insurance?
Type | Coverage Length | Best for | Average Monthly Cost |
|---|---|---|---|
10 to 30 years | Affordable life insurance for a set period | $47(F), $59 (M | |
Lifetime | Early planners with beneficiaries who rely on them financially | $540 (F), $574 (M) | |
Lifetime | Permanent coverage with flexible payment options | $310 (F), $362 (M) | |
Lifetime | High earners who are comfortable taking on investment risk | -- | |
Lifetime | Seniors covering burial and end-of-life expenses | $22 (F), $25 (M) |
Rates are based on averages for a 40-year-old nonsmoker in average health with $500,000 in coverage for term, whole and universal life and $10,000 for final expense. Your rate depends on age, health, coverage amount and state.
Other options include group life insurance through employers, no-exam policies with simplified underwriting, joint coverage for couples or business partners and accidental death and dismemberment insurance. Each fits a specific situation and isn't a substitute for standard life insurance coverage.
Term Life Insurance
Term life insurance covers a set period of 10, 20 or 30 years (a few insurers offer 40-year terms). Die during the term and your beneficiaries get a death benefit, subject to policy terms and conditions. Outlive the policy and coverage ends with no payout. Term life costs less than permanent insurance and works simply. Most people buy it to protect dependents during working years.
Pros- Affordable financial coverage
- Coverage lasts as long as you need it
- Simple application process, and some of the best term life insurance providers don’t require a medical exam
Cons- You must reapply when your term ends
- Premiums often go up at renewal
- Coverage may be harder to qualify for as you age, though many providers offer plans for older adults
- Doesn’t build cash value
TERM LIFE CONVERSION OPTION
Need long-term coverage? Many term policies let you switch to permanent coverage without medical exams within set timeframes (usually the first 10 to 20 years). Start with cheap term coverage now and switch later if your needs change.
Whole Life Insurance
Whole life insurance is a type of permanent life insurance with fixed premiums, lifetime coverage and a guaranteed death benefit. It also builds cash value at a set rate you can borrow against. Because the premiums and payouts don’t change, it’s a common choice for estate planning, final expenses and inheritance goals.
Unlike term life, whole life doesn’t expire. Coverage stays active as long as you keep up with premiums. Some policies also pay dividends or offer investment-linked growth for extra financial flexibility.
- Pros
- Lifetime coverage with no expiration
- Guaranteed payout to beneficiaries, no matter when death occurs
- Option to borrow against the policy when needed
- Premiums and death benefits stay fixed for life
- Cons
- Higher premiums than term life and other alternatives
- Cash value grows slowly in the early years
- Cancellation fees can be substantial
- Policy loans have minimum eligibility requirements
WHOLE LIFE INSURANCE CASH VALUE
Borrowing against your policy's cash value reduces both the available cash and the death benefit until the loan is repaid. Interest accrues on the balance, and the rate isn't always cheaper than other borrowing options. An unpaid loan can eventually cause the policy to lapse.
Dividends can be taken as cash, applied to lower premiums, used to buy additional coverage or left in the policy to grow with interest.
Universal Life Insurance
Universal life insurance (UL) is permanent life insurance with more flexibility than whole life. Premiums, the death benefit and cash value contributions are all adjustable as circumstances change. Part of each premium goes into a cash value account invested for potential growth.
UL policies don't guarantee investment returns. Cash value grows tax-deferred but tracks market performance, and losses can deplete the account below the level needed to keep the policy active. UL is best suited to people who are comfortable making long-term financial decisions and understand the investment component.
- Pros
- Flexible premium payments
- You can raise or lower the death benefit as your needs change
- Coverage stays active as long as the policy holds enough cash value
- Costs less than whole life while still building cash value
- Cons
- No guaranteed returns or fixed death benefit
- Cash value earns interest at insurer-set rates, which can go up or down
- The policy lapses when the cash value runs out
- Requires more hands-on management than whole life to keep coverage active
UNIVERSAL LIFE NO-LAPSE GUARANTEE OPTION
Some universal life policies include a no-lapse guarantee. Others make it available as an optional rider at added cost. The guarantee keeps coverage active even if the cash value drops to zero, as long as minimum premiums are paid. Without it, flexible premium payments carry more risk of the policy lapsing.
The policy may lapse if contributions fall short and the cash value can't cover insurance charges. Policy lapse risk varies by insurer and policy design. Consult your policy documents for specific lapse provisions.
Indexed Universal Life Insurance
Indexed universal life insurance is a type of permanent life insurance that links cash value growth to a stock market index, such as the S&P 500, instead of a fixed interest rate. The policy has a guaranteed minimum interest rate and a cap on maximum returns. That structure limits how much the policy can earn in a strong market. It also shields your cash value when the index drops.
Indexed universal life policies use a cap rate and a participation rate to calculate cash value credits. The cap sets the highest return the policy can earn in a given period. The participation rate determines what percentage of the index's gain applies to the account. Insurers set the cap and participation rate separately for each policy and can adjust them at renewal, so ask for the current rates before buying.
- Pros
- Cash value increases when the linked index performs strongly
- Guaranteed minimum interest rate shields cash value from market losses
- Premiums and death benefits are adjustable within policy limits
- Cash value accumulates on a tax-deferred basis
- Cons
- Growth caps restrict maximum cash value accumulation
- Insurers may reduce caps or participation rates at renewal
- Fees and policy charges can erode net returns more than with whole life insurance
- Ongoing funding required to keep the policy in force
Variable Life Insurance
Variable life insurance is a form of permanent coverage that lets you invest the policy’s cash value in different accounts such as mutual funds, stocks and bonds. It comes in two types: variable whole life with fixed premiums and variable universal life with flexible premiums.
Your cash value, and in some cases your death benefit, can increase or decrease based on market performance. Most policies include a guaranteed minimum death benefit even if the market performs poorly. Still, your cash value can still go down if the investments lose value.
- Pros
- Highest cash value growth potential of any life insurance type
- You decide how to invest the cash value
- Multiple investment options through your insurer
- Permanent coverage with no expiration
- Cons
- No downside protection if investments lose value
- Cash value drops when your investments underperform
- You’ll need investment knowledge and active management to pick the right funds
- Higher fees than other policy types because of investment management costs
- Premiums run higher than whole life
Final Expense Life Insurance
Final expense life insurance is a permanent policy that covers funeral, burial and related end-of-life costs. Coverage amounts are low, often between $5,000 and $25,000, but premiums are usually affordable, and acceptance rates are high, even for older adults or those with health issues.
Final expense insurance is best for people whose loved ones don’t need large financial support but would benefit from help covering final expenses. If appropriately structured, term and whole life insurance policies can also serve this role.
- Pros
- Offers guaranteed or simplified approval without a medical exam
- Coverage goes into effect quickly, often within one to three days
- Premiums remain level for life
- Benefits pay out quickly to cover immediate funeral and burial expenses
- Cons
- Expensive per dollar of protection
- Costs more than term life insurance for the same coverage amount if you can qualify for traditional policies
- Coverage amounts capped at low limits, often $5,000 to $25,000
- May not pay full death benefit if you die within the first two or three years
Other Types of Life Insurance
Other life insurance products are designed for specific needs. There are also various types based on the type of underwriting (how insurers evaluate your health and lifestyle to determine your premiums and coverage eligibility).
Different Types of Life Insurance by Coverage
- Annual Renewable Life Insurance
An annual renewable term (ART) policy renews each year without a new medical exam. Premiums start low but go up annually as you age. That flexibility has a cost: rising premiums can make the policy expensive over time. ART works best as stopgap coverage between longer-term policies.
Mortgage Protection Life InsuranceMortgage life policies pay off the remaining mortgage balance if you die before the loan is repaid. The death benefit drops as the balance does, and the lender is usually the beneficiary.
Credit Life InsuranceCredit life coverage is tied to a loan or line of credit. If the borrower dies before paying off the debt, the policy covers the remaining balance. The benefit shrinks as the loan is repaid, and the policy ends when the balance hits zero.
Accidental Death and Dismemberment InsuranceAccidental death and dismemberment (AD&D) insurance pays a benefit when the insured dies or suffers serious injury from an accident, including loss of sight, hearing, speech or a limb. It’s affordable and available as a standalone policy or as a rider on a traditional life insurance policy. It doesn’t cover illness-related deaths, so AD&D works best as supplemental protection, not a primary policy.
Group Life InsuranceEmployers and organizations offer group life insurance to cover a pool of people under the same benefits. Employers often subsidize premiums, so group coverage is usually more affordable than individual whole life insurance.
But the coverage has real limitations. Policies aren’t customizable, and all members receive the same benefits regardless of their individual needs. Coverage usually ends when employment does, and though no medical exam is required, some group policies still deny applicants with terminal illnesses, hazardous jobs or high-risk lifestyles.
Joint Life InsuranceJoint life insurance covers two people, usually spouses, under a single policy. The payout comes either after the first death (first-to-die) or after both policyholders die (last-to-die):
- First-to-die pays when the first insured person dies and gives financial support to the surviving spouse or dependents.
- Last-to-die pays only after both policyholders have died and is often used for estate planning, including covering estate taxes or transferring wealth to heirs.
Joint coverage can cost less than two separate policies, though it may offer less flexibility if the couple separates or has different coverage needs.
Dependent Life InsuranceDependent life insurance covers a policyholder’s spouse or dependent child and pays a benefit when that person dies. Employers often offer it as a low-cost add-on to group life coverage, though standalone policies are also available. Coverage amounts tend to be modest since the benefit is meant to cover funeral costs and other immediate expenses, not replace lost income.
Different Types of Life Insurance by Underwriting
Fully Underwritten Life InsuranceMost life insurance policies require a detailed underwriting process to assess risk, often including a medical exam. Insurers look at age, health, lifestyle and hobbies to determine eligibility and pricing. The more complete your health information, the better your chances of qualifying for lower premiums.
Fully underwritten policies require detailed health questionnaires, medical exams and sometimes a medical records review, but offer the most competitive rates for healthy applicants.
No-Exam Life InsuranceIf you have a medical condition or want to skip the exam, some life insurance options offer faster, more accessible coverage, usually at a higher cost and with lower benefit limits.
The main types of life insurance that don't require a medical exam include:
- Simplified issue policies offer higher coverage limits (often up to $250,000) and lower premiums than guaranteed acceptance, but you must be in reasonably good health to qualify.
- Guaranteed acceptance life insurance requires no medical questions, so nearly anyone can get coverage. These policies come with higher premiums, limited coverage (often capped at $25,000 to $50,000) and a waiting period. If the insured dies within two years, beneficiaries get only the premiums paid plus interest.
How to Choose the Best Type of Life Insurance
- 1Assess Your Needs
Take stock of your income, debts, living expenses and future financial obligations. Factor in what your dependents would need if your income stopped. Our life insurance calculator gives you a quick coverage estimate.
- 2Understand the Different Types of Policies
Before comparing prices, get clear on what separates term, whole, universal and other policy types. The type you choose affects cost, flexibility and how long coverage lasts.
- 3Compare Quotes
Life insurance costs vary across insurers for the same coverage. Get quotes from several companies before deciding. Online tools and independent brokers both give you side-by-side comparisons.
- 4Review the Policy Details
Read the full policy before committing. Check terms, conditions, exclusions and the claims process. Ask your agent to explain anything that isn't clear.
- 5Consider the Insurer's Reputation
Verify the insurer's financial stability through ratings from AM Best or Standard & Poor's and read customer reviews before buying.
- 6Regularly Review and Update Your Policy
Coverage needs shift with major life events: job changes that affect income, marriage or divorce, the birth or adoption of a child, a home purchase, significant debt changes or a meaningful improvement in health. Review the policy at each of these points and update it accordingly.
*Life insurance regulations and available products vary by state. This information is for educational purposes only and should not replace professional insurance advice.
LIFE INSURANCE RIDERS TO CONSIDER
Riders customize a policy for specific needs. Disability makes waiver of premium riders valuable: they drop your payments if you can't work. Accelerated death benefit riders advance part of your payout after a terminal diagnosis. Outlive your term policy, and a return of premium rider refunds what you paid, usually for a higher premium. Long-term care riders let you tap the death benefit for care costs. Ask your insurer which riders fit your budget.
Life Insurance Types: Bottom Line
The main types of life insurance range from term and whole life to universal, variable, final expense and niche policies like AD&D and joint coverage. They each serving different purposes based on your age, financial goals, health status and coverage needs.
Compare rates, review your coverage needs and consider how much flexibility you'll want as your life changes.
Different Types of Life Insurance: FAQ
We answer common questions about life insurance types.
Term life insurance is the least expensive life insurance, providing coverage for a specific period, usually 10 to 30 years, without a cash value component. Term life insurance premiums are lower than those of permanent life insurance policies like whole life or universal life.
Longer-term life insurance policies often come with higher premiums because the longer the term, the more likely a provider will have to pay a death benefit. But this may not be the case if you opt for a decreasing term policy.
Permanent life insurance covers three main types: whole life, universal life and variable life. All three last your entire life and build cash value. Whole life has guaranteed premiums and a guaranteed death benefit. Universal life has flexible premiums and an adjustable death benefit. Variable life lets you invest the cash value in market-based options.
Get a life insurance policy that suits your lifestyle by considering your current income, household expenses, dependents, income sources and term-length needs. The right policy for others may not work best for your situation.
MoneyGeek collected life insurance quotes for a 40-year-old nonsmoker in average health to compare costs across policy types. Term (20-year term), whole and universal life quotes used a $500,000 coverage amount. Final expense quotes used a $10,000 coverage limit. It shows the smaller benefit amounts typical of that policy type. Rates vary by insurer, state, health class and coverage amount.
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About Mark Fitzpatrick
Mark Fitzpatrick is a licensed Property and Casualty (P&C) Insurance Producer and MoneyGeek's resident expert in insurance and economics. In nearly a decade covering the insurance market at LendingTree and MoneyGeek, he's analyzed hundreds of carriers and millions of rates across auto, home, renters, health and life insurance.
His work has appeared in The Washington Post, The New York Times and NPR. He draws on independent cost and consumer experience data, and no insurance company partnerships affect his recommendations.
Mark studied at Boston College and later earned a master's in economics and international relations from Johns Hopkins University. He worked in financial risk management at State Street before joining MoneyGeek. He's also a five-time “Jeopardy!” champion.