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What Are the Different Types of Life Insurance?

Life Insurance
multigenerational family life insurance and you

Many people start to think about life insurance for a number of reasons. Some consider purchasing a life insurance policy after a major life milestone, such as marriage or the birth of their first child. Others begin to weigh their options after seeing a close friend or family member struggle financially after the loss of a loved one. A policy could help you provide financial protection for those you hold dear. There are many types of life insurance available, but how can you determine which one is right for you?

Comparing the different types of life insurance could help you better understand your options. You are a unique individual with unique needs, and learning more about term life, whole life and universal life insurance — and their differences — could give you more confidence to decide.

Compare Life Insurance Options

When reviewing the life insurance options, keep in mind there's a lot of variety in the market within the categories of life insurance. As with many types of insurance, the price you pay will be affected by your age and health profile. Generally, the younger and healthier you are when you buy, the more affordable the premiums could be.

3 Types of Life Insurance

First, let's examine and compare term, whole and universal life insurance policies:

Term Life Insurance

Term life insurance only features a death benefit, which is a one-time payment to your beneficiary upon your death. However, most term products also offer optional riders that could allow you to renew or convert your policy. A term policy has no accessible cash or account value. The premiums on a term life policy usually can be fixed at the same level for a specified number of years — generally 10, 15, 20 or 30 years. Once the term length ends, the policy ends. This is one of the key differences between term life and permanent life insurance policies.

Whole Life Insurance

Whole life insurance is a permanent life insurance policy and features a death benefit like a term policy. However, it also offers cash value, which builds up within the policy as time goes on. You could borrow funds against that cash value for any reason. Note that there is a potential for surrender charges, and unrepaid loans will decrease the death benefit. A whole life policy can be "paid up," which means you will not have to pay premiums after a certain period and the policy will remain in force.

Universal Life Insurance

Universal life insurance is also a permanent life insurance policy and is considered one of the most flexible because you can adjust the premium and death benefit (within limitations) after the policy is in force. It shares the same basic components as whole life insurance (i.e., a cash value) but may offer you more options. For this policy type, the cash value's underlying rate of accumulation will be adjusted according to financial market trends but with a guaranteed minimum interest rate. Universal life may have lower premiums for the same death benefit amount than whole life. However, the underlying cost of the actual life insurance coverage will rise over time, unlike with whole life policies.

Examine Your Coverage Needs

If you have a new bouncing baby girl or boy, would it be wise to consider a different policy than someone who is entering the workforce for the first time — or close to the golden years of retirement? Well, it could all depend on what you need. There are some key questions you could ask that could help you better understand your own insurance coverage needs and decide which type of life insurance could be a good fit for you.

How Much Death Benefit Protection Do You Need & How Much Can You Afford?

Your life stage could greatly influence the answer to this question. With a term life policy, you could buy a larger death benefit for the same premium amount you would pay for a whole life or universal life policy. This means that if you want $500,000 in life insurance protection — but are just beginning your career and living on a tight budget — some term life policies could be a good option for you.

Let's say you're married with a mortgage and nine-year-old twin girls. You may need a larger death benefit than a recent college graduate with a rented apartment. In your case, a whole life insurance policy could help provide a death benefit for your loved ones while also giving you the security of cash value.

What Are Your Long-Term Life Insurance Needs?

Now, imagine you aren't expecting any children for a while — but dream of starting a family someday. You might consider a universal life policy, which could offer you flexibility in a changing world. You may be able to increase the size of your death benefit down the road as your family grows and your circumstances change. For the same premium you might pay for a $500,000 term life policy, you could also start building up cash value in a whole life or universal life policy (albeit with a smaller death benefit).

Life insurance is as unique as you are, and speaking with a financial representative could help you evaluate your needs and discover which type of coverage could be right for you. Whether you're heading into an exciting new phase in your life — or reflecting on how you could better provide for the ones you love — understanding and comparing the types of life insurance policies available could make all the difference.

Summary of Features & Benefits

If you’re trying to decide which type of life insurance to get, the right solution will depend on your unique needs. Consider these features and benefits of whole, term and universal life insurance:

Life Insurance Comparison Infographic

Download Summary of Features & Benefits (PDF)


Summary of Features & Benefits

If you're trying to decide which type of life insurance to get, the right solution will depend on your unique needs. There are typically three main types to choose from.

Whole Life Insurance

  • Protection for life: Coverage lasts your entire lifetime1

  • Level premiums: Policy payment rate will never increase

  • Cash value: Policy has growth potential (money you could borrow against1)

  • Guaranteed death benefit: Amount your beneficiary receives is guaranteed1

Term Life Insurance

  • Protection for a specified time: Death benefit paid if you die during selected term (10-30 years)

  • Affordable premiums: Only pay for the duration you need
  • Convertibility: Can choose to renew2 or convert3 your policy to permanent insurance

  • Simplicity: Decide your coverage amount and term length

Universal Life Insurance

  • Protection for life: Coverage lasts your entire lifetime1

  • Flexible premiums: Adjust your premium amount as needs change4

  • Cash value: Policy has growth potential (money you could borrow against1)

  • Choice: Can adjust premiums4 and death benefit3 based on your needs

Nearly 54% of Americans have some form of life insurance, and the top three reasons they do are to cover burial and final expenses, to replace lost income when a loved one dies, and to leave an inheritance to family members.

Interested in learning more? Explore life insurance.

1 Life insurance policy guarantees are subject to the timely payment of premiums. Loans will accrue interest. Loans and withdrawals may generate an income tax liability, reduce the Account Value and the Death Benefit, and may cause the policy to lapse.
2 Once the policy has renewed to annual renewal term rates, no conversion is allowed.
3 Increases in coverage are subject to underwriting.
4 There must be enough cash value in the policy to cover monthly charges if a lower premium is paid than the amount selected at issue or if a premium payment is skipped. Additional premium payments may need to be made to keep the policy in force.

Life insurance products are not bank products, are not a deposit, are not insured by the FDIC, nor any other federal entity, have no bank guarantee, and may lose value. 

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Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.