Term life insurance is a temporary plan that provides coverage for a specific number of years, such as 10, 15, 20, or 30 years. If you live beyond the years you choose, you or your beneficiaries won't receive any payout.
Term life insurance is less expensive than other options due to the shorter coverage period, making it sufficient for most people. Premiums are fixed throughout the policy term, so you pay the same amount every year.
There's no build-up of the cash value in term life policies, which means beneficiaries get only the death benefit.
Universal life insurance is a permanent policy that provides coverage for the lifetime of the policyholder. It accumulates tax-deferred cash value over time. If not touched, this cash value forms part of the benefits distributed to beneficiaries.
While there's a minimum premium amount, universal life policies have flexible premiums, enabling you to vary your yearly payments and pay at any time. Depending on the insurance provider's investment policies, the excess money can go into stocks, bonds, annuity, and other investments, offering you the possibility of a higher return, but at a greater risk.
Like universal, whole life insurance provides lifetime coverage for policyholders. It also builds tax-deferred cash value over time, which goes to the policy holder's beneficiaries if you do not use the cash before passing away.
Premiums stay the same for whole life policies, so you pay the same amount every year. So if you get in when you're younger and healthier, you'll be able to lock in a lower premium rate.