Types of Life Insurance Policies

Below is a 2025 snapshot of common policy types, with current price ranges, interest‑crediting context, and key regulatory notes to help you compare options.

Term life insurance

Pros: Lowest cost per dollar of coverage; level premiums during the term; often includes a conversion option
Cons: Temporary coverage; no cash value; renewal after the level term is expensive
Good for: Budget‑friendly income replacement during working/child‑rearing years

Appropriate for most consumers, term life insurance pays a death benefit if death occurs during the selected level term (e.g., 10–30 years). A niche variant with a decreasing death benefit exists but is less common. Rates depend on age, sex, smoker status, underwriting class, term length, and coverage amount.

2025 benchmarks for healthy non‑smokers (Preferred/Preferred Plus) illustrate the affordability of level term coverage. Typical monthly premiums for $500,000 of 20‑year term are about $14–17 (female) and $18–23 (male) at age 25; $18–22 (female) and $22–28 (male) at age 35; $35–45 (female) and $50–65 (male) at age 45; and $90–110 (female) and $125–155 (male) at age 55, according to market indexes and live brokerage quotes (Policygenius Price Index; Quotacy). For $1,000,000 of coverage (20‑year term), premiums typically rise by ~1.7–2.1x rather than a strict 2x because of banded pricing (Forbes Advisor; ValuePenguin). Choosing a 30‑year term often adds ~30–60% at younger ages, and carriers generally limit maximum issue ages for longer terms (e.g., many cap 30‑year terms around the late 50s); see carrier examples in Haven Life and aggregates from Policygenius. Smoker rates are several times higher than non‑smoker rates at the same age (Quotacy).

If you still need coverage when the term ends, options typically include shopping for a new policy, renewing at a higher post‑level rate, or converting to permanent insurance (if your policy allows). Availability and cost tighten with age and health changes. Many insurers cap issue ages for 20‑ and 30‑year terms and price steeply at older ages; aggregated rate trackers show broadly stable non‑smoker pricing into 2025 with normal month‑to‑month fluctuations (Policygenius).

Permanent life insurance

Permanent life insurance is intended to stay in force for life if adequately funded. Policies typically have maturity ages between 95 and 121, include a cash value component, and are illustrated under the NAIC Life Insurance Illustrations Model Regulation (Model #582), which standardizes how guaranteed vs. non‑guaranteed values are shown to consumers.

Compared to term, permanent policies cost more because they insure you for a lifetime and include policy charges and cash value features. Premium patterns are designed so that you pay more in early years than the current cost of insurance, building value that helps support the policy later. Most permanent designs provide policy loan/withdrawal provisions; however, loans/withdrawals can reduce cash value and death benefit and may have tax implications—consult a tax professional and review Model #582 illustrations carefully.

There are several common types of permanent life insurance:

Whole life insurance

Pros: Strong guarantees of premium, cash value schedule, and death benefit; eligible “participating” policies can pay non‑guaranteed dividends
Cons: Higher premiums and limited premium flexibility compared with UL/IUL
Good for: Consumers seeking lifetime guarantees and conservative, predictable accumulation

Whole life insurance provides guaranteed level premiums, a guaranteed death benefit, and a guaranteed cash value schedule. Participating policies may credit non‑guaranteed dividends based on insurer experience; dividends can change and are not assured. Policies allow loans against cash value; outstanding loans/interest reduce benefits.

Because of its guarantee structure, whole life is often used for permanent needs (legacy, final expenses, special‑needs planning) or as a conservative component within a broader plan. Assess guaranteed vs. non‑guaranteed columns in your illustration (NAIC Model #582).

Universal life insurance

Pros: Flexible premiums and adjustable death benefit; improved current crediting environment vs. 2020–2021; IUL variants often feature a 0% floor on index segments
Cons: Non‑guaranteed crediting can reset; underfunding can lead to lapse or require higher future premiums
Good for: People seeking lifetime coverage with flexibility and either fixed or index‑linked crediting

Universal life insurance credits interest to cash value based on either a declared rate (current‑assumption UL) or an external index formula (IUL). Since market interest rates rose sharply from 2022 and the 10‑year U.S. Treasury yield hovered at elevated levels after peaking near 5% in Oct 2023, insurers’ portfolio yields and net investment income increased, enabling higher UL fixed‑account crediting and better IUL caps/participation rates than in the low‑rate era (FRED: 10‑Year Treasury; NAIC Capital Markets; Milliman). Illustration guardrails for IUL were tightened via NAIC AG 49 revisions to curb overly aggressive projections (NAIC AG 49 updates).

UL lets you vary premiums and adjust the death benefit within policy limits. During financial stress, you can draw on cash value to cover charges, but doing so risks lapse if value depletes. Performance remains sensitive to credited rates, caps/spreads, policy charges, and funding; obtain updated in‑force illustrations and test lower‑rate scenarios (NAIC).

Guaranteed universal life insurance

Pros: Typically lower guaranteed premiums for lifetime death benefit compared with whole life
Cons: Little to no cash value; flexibility is focused on guarantee structure
Good for: People who want lifelong coverage at the lowest guaranteed cost without an accumulation focus

Guaranteed universal life (GUL/ULSG) emphasizes a guaranteed death benefit to a target age (often to age 90/95/121) with minimal cash value. It blends term‑like simplicity with lifetime guarantees; in exchange for lower cost vs. cash‑value‑heavy designs, you give up meaningful accumulation.

Variable life insurance

Pros: Market‑linked growth potential inside tax‑deferred policy structure; flexible features in some designs
Cons: Investment risk to cash value (and potentially death benefit depending on option); layered fees (M&E, admin, subaccount expenses)
Good for: Investors comfortable with market volatility who will review costs, risks, and objectives

Variable life insurance places cash value in separate account subaccounts that fluctuate with the market. Because variable life is a securities product, sales require delivery of a prospectus, and communications are overseen by the SEC/FINRA; investors should understand objectives, risks, charges (including mortality & expense risk fees and fund expenses), and surrender periods (FINRA). While gains grow tax‑deferred, poor market performance can erode cash value and may necessitate higher premiums to keep coverage in force.

Variable-universal life insurance

Pros: Flexible premiums and death benefit with broad investment menu; tax‑deferred accumulation potential
Cons: Higher risk and complexity; securities prospectus required; multiple fee layers and possible surrender charges
Good for: People looking for maximum flexibility and willing to manage market risk and ongoing costs

Variable-universal life insurance combines UL’s flexible funding with variable life’s separate account investments. Suitability hinges on tolerance for market volatility, understanding of fee layers (M&E, admin, and subaccount expenses), and long‑term funding discipline; review the statutory prospectus and compare guaranteed vs. non‑guaranteed elements per NAIC Model #582 and FINRA guidance.

No-exam or simplified issue

Pros: Faster decisions and convenient e‑applications; many accelerated programs offer competitive pricing for well‑qualified risks
Cons: Lower face‑amount limits for simplified/guaranteed issue; higher cost per dollar of coverage; cases can be routed to full underwriting
Good for: People prioritizing speed/convenience or with health histories that fit defined non‑medical criteria

No-exam or simplified issue life insurance spans three approaches. Accelerated underwriting (AU) uses data (e.g., Rx history, MIB, MVR, and increasingly EHRs) to approve qualified applicants without labs/exam, often up to low‑seven‑figure face amounts depending on age/class; if data suggest elevated risk or are inconsistent, the case is referred to traditional labs/exam (Society of Actuaries; NAIC consumer alert; LexisNexis 2024 Trends). Simplified‑issue policies rely on health questions and database checks with lower face amounts and higher premiums per dollar than fully underwritten. Guaranteed‑issue policies ask no health questions but typically include a graded death benefit for non‑accidental death during the first 2–3 years. Expect higher costs for smokers and for applicants with significant conditions; providing complete and accurate information helps avoid AU referrals or adverse actions (SOA; NAIC; LexisNexis).

Final expense life insurance

Pros: Small permanent policies with level premiums; simplified underwriting with quick decisions
Cons: Higher cost per dollar of coverage; guaranteed‑issue designs usually have a graded waiting period
Good for: Someone who doesn’t need full coverage but wants to cover funeral/burial costs and small debts

Final expense life insurance is usually whole life with modest face amounts. Simplified‑issue options commonly range from roughly $2,000–$40,000 with typical issue ages around 45–85; guaranteed‑issue versions often accept ages ~50–80 with smaller maximums (often up to about $25,000) and a graded benefit for non‑accidental death in the first 2–3 years. These features and trade‑offs are outlined by the Insurance Information Institute (III). To estimate needs, note that funeral‑related prices have trended higher over time per the Bureau of Labor Statistics’ funeral expenses CPI (BLS). Potential offsets include veterans’ burial allowances (VA) and Social Security’s one‑time $255 lump‑sum death payment for eligible survivors (SSA). Consider portability and transparency if evaluating preneed contracts; the FTC is moving to modernize the Funeral Rule to enhance price disclosure (FTC).

What’s Next?

Interested in finding a term life insurance policy? Read our review of the best term life insurance companies.
Ready to search for whole life insurance coverage? Check out our review of the best whole life insurance companies.
Looking for more information on common additional life insurance coverages? Find out what to know about life insurance riders.

Types of Life Insurance Policies

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