5 Most Common Types of Life Insurance Policies

When shopping for life insurance, most people choose between two basic policy types: term life insurance and whole life insurance. But there are three additional types of life insurance policies you may encounter more frequently than others: universal life insurance, variable life insurance, and final expense life insurance — also known as burial insurance.

Here's everything you need to know about the five most popular types of life insurance policies, including how they work, their pros and cons, how long they last, and who they’re best for.

Term life insurance

Term life insurance is the most useful type of life insurance for most people because it’s affordable, only lasts for as long as you need it, and doesn’t come with many tax rules or restrictions.

Term life is usually the easiest and cheapest way to provide a financial safety net for your loved ones — but it can also be used to cover business partners or even key executives whose death would cause a financial loss to the company they work for.

Best for: Most life insurance shoppers. Anyone looking for cheaper life insurance for 10 to 30 years should buy term life insurance.
How it works: Term life insurance lasts for a set number of years — also known as the “term” — before it expires. You pay premiums toward the policy, and if you die during the term, the insurance company pays a set amount of money, known as the death benefit, to your designated beneficiaries.
Pro: Affordability — term policies are less expensive than other types of life insurance and generally have lower premiums.
Con: Length — term life expires at the end of its term, but you can choose a term that aligns with when your loved ones need the most financial protection, like before you’ve paid off a mortgage or before your children graduate college.

Whole life insurance

Whole life insurance is the most common type of permanent life insurance because of its simplicity and lifelong duration. Its cash value — an investment-like, tax-deferred savings account — earns interest at a fixed rate set by the insurer. Your premiums also remain the same for the lifetime of the policy.

Best for: High-net-worth individuals who want to diversify their investment portfolio with a low-risk investment option or those with dependents who may need long-term care.
How it works: Whole life insurance has a guaranteed death benefit and cash value that earns interest over time. A portion of your premium goes toward the cost of maintaining the insurance policy and the rest goes toward the cash value account. Once you’ve accumulated enough cash value, you can borrow or withdraw money from it.
Pro: Cash value & lifelong coverage — the cash value component can cover endowments or contribute to estate plans. And since this coverage lasts for your entire life, it can help support long-term dependents such as children with disabilities.
Con: Cost & complexity — a whole life insurance policy is usually more expensive than a term life policy for the same death benefit amount. The cash value component makes whole life more complex than term life because of fees, taxes, interest, and other stipulations.

Universal life insurance

Universal life insurance is a flexible permanent life insurance policy that lets you decrease — or increase — how much you pay toward your monthly or annual premiums over time. If you decrease how much you spend on premiums, the difference is withdrawn from your policy’s cash value.

A universal life insurance policy can be a good fit if you have a higher budget and you’re looking for some flexibility in your life insurance. A universal policy can be even more expensive and complicated than a standard whole life policy, especially as you age and your premiums increase.

Best for: High earners who are trying to build a nest egg without entering a higher income bracket.
How it works: Universal life insurance allows you to adjust your premiums and death benefit depending on your needs. If, after some time, you decide to stop paying or lower your monthly premiums, you can use the cash value to cover your premiums.
Pro: Flexibility — you can adjust your premiums based on your financial needs.
Con: Investment risk — interest earned from the cash value can be based on market performance depending on the type of universal policy you have, so it’s not the best option to save money for the future.

Variable life insurance

Variable life insurance is a type of permanent life insurance that allows you to invest the money from your cash value in various funds offered by the insurance company, including mutual funds.

While variable life insurance comes with a guaranteed minimum death benefit, the cash value amount isn’t guaranteed and will depend on market conditions.

You may earn more interest than you would with a whole life insurance policy, but you could also lose money if the fund underperforms.

Best for: High earners looking for permanent coverage options to diversify their investment portfolio.
How it works: Variable life provides the opportunity to invest the cash value in various funds offered by the insurance company, including mutual funds. Investment performance will reflect broader market trends.
Pro: Potential — variable policies may earn more interest than traditional whole life.
Con: Investment risk — potential for losing money if the funds you picked underperform.

Final expense insurance

Final expense insurance, also known as burial insurance, is a type of life insurance designed to pay a small death benefit to your family to help cover end-of-life expenses.

Unlike traditional life insurance, which is meant to replace decades’ worth of income, burial insurance is usually suited to older adults who want a smaller policy to cover their funeral costs.

Because of its high rates and lower coverage amounts, final expense insurance is usually not as good a value as term life insurance.

Best for: People who have trouble qualifying for traditional coverage, like seniors and people with serious health conditions, or those who may only need a small amount of permanent coverage.
How it works: Unlike most traditional policies that require a medical exam, you only need to answer a few questions to qualify for final expense insurance. And there’s little to no waiting period to get covered.
Pro: Fewer health conditions to buy a policy — easy access to a small benefit to cover end-of-life expenses, including medical bills, burial or cremation services, and caskets or urns.
Con: Cost — expensive premiums for lower coverage amounts.

The right policy for you depends on your personal circumstances, how much coverage you need, and your budget. The best way to find the right policy for your specific needs is to talk with a financial advisor and work with an independent broker. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.

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Comparing the 5 main types of life insurance

Life insurance type	Coverage length	Best for ages	Medical exam required	Builds cash value	Death benefit payout	Premiums
Term	10 years to 40 years	18-65	Not always	No	$100,000+	Fixed
Whole	Life	18-65	Yes	Yes	$50,000+	Fixed
Universal	Life	18-65	Yes	Yes	$50,000+	Flexible
Variable	Life	18-65	Yes	Yes	$50,000+	Fixed
Final expense	Life	45-85	No	Yes	Up to $50,000	Fixed

What type of life insurance is best for you?

The best type of life insurance for you depends on your budget and your financial responsibilities.

Term life insurance policies are usually the best solution for people who need affordable life insurance for a specific period in their life. If your goal is to protect your family from financial loss if they had to live without your income, term life is likely a good fit for you.
Permanent life insurance policies, including whole, universal and variable life insurance, are best for people who can afford much higher premiums, have permanent coverage needs, or want to use life insurance to diversify their investment strategy.
If you’re already maximizing contributions to traditional tax-advantaged accounts like a 401(k) and Roth IRA and want another investment vehicle, permanent life insurance could work for you.
Final expense insurance can be an option for people who might not be able to get insured otherwise because of age or serious health conditions, or elderly consumers who don’t want to burden their families with burial costs.

“The right type of life insurance for each person is completely dependent on their individual situation,” says Patrick Hanzel, a certified financial planner and advanced planning manager at Policygenius. “It’s always recommended you speak with a licensed agent to determine the best solution for you.”

Most popular types of life insurance: Main features at a glance

Policy features	Term life insurance	Whole life insurance	Universal life insurance	Variable life insurance	Final expense insurance
Provides lifelong coverage	No	Yes	Yes	Yes	Yes
Limited length of coverage	Yes (up to 40 years)	No	No	No	No
Cheapest coverage	Yes	No	No	No	No
Guaranteed death benefit	Yes	Yes	Yes	Yes	Yes
Cash value	No	Yes	Yes	Yes	Yes
Minimal death benefit	No	No	No	No	Yes
Easy to understand	Yes	No	No	No	Yes
Flexible premiums	No	No	Yes	No	No
Can increase death benefit	No	No	Yes	Yes	No
Hands-on investment tool	No	No	No	Yes	No

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Ten other common types of life insurance

Now that you’re familiar with the basics, below are additional life insurance policy types. Many of these life insurance options are subtypes of those featured above, meant to serve a specific purpose, or they are defined by how their application process — also known as underwriting — works.

By type of coverage

By type of underwriting

Group life insurance

Group life insurance, also called group term life insurance, is one life insurance contract that covers a group of people. It’s usually offered by employers, but may also be offered by unions and trade organizations.

Group life insurance is often subsidized by your employer or organization, so you pay little or none of the policy’s premiums. You get coverage up to a limit, usually $50,000 or one to two times your annual salary — so you usually need to buy additional coverage on your own to fully protect your loved ones.

Best for: Anyone who’s offered group life insurance by their employer.
Pro: Convenience — group policies provide guaranteed coverage at little or no cost to employees regardless of your health profile.
Con: Limited coverage — and you usually lose coverage if you leave your employer.

Mortgage protection insurance

Mortgage protection insurance, also known as MPI, is designed to cover your remaining mortgage if you die before paying off your loan. Unlike other policy types, MPI only pays the death benefit to your mortgage lender, as opposed to a family member, making it a much more limited option than a traditional life insurance policy.

Best for: Anyone with mortgage obligations who’s not eligible for traditional life insurance.
Pro: Access — an MPI policy can be an option for people who can’t qualify for standard term life insurance. It also guarantees the death benefit will be used to cover your mortgage.
Con: Limited coverage — it only protects mortgage payments.

Credit life insurance

Credit life insurance is a type of life insurance policy — similar to MPI — that pays out the death benefit to your lender if you die before a loan is repaid. The policy is tied to a single debt, such as a mortgage or business loan. Your lender is the sole beneficiary of the policy and the death benefit only covers the loan in question.

Best for: Anyone with debt obligations who’s not eligible for traditional life insurance.
Pro: Convenience — credit life insurance can be an option to cover a loan if you’re not eligible for standard life insurance.
Con: Coverage limitations — your lender is the beneficiary and the death benefit only covers a specific debt.

Accidental death and dismemberment insurance

Accidental death and dismemberment insurance (AD&D) covers you if you die in an accident, or if an accident causes you to lose a hand, foot, or limb. It’s usually offered by employers as an alternative to life insurance, but it’s generally inexpensive if you buy a private policy.

Because AD&D only pays out if you’re injured or killed in an accident, it’s not a suitable substitute for life insurance. AD&D insurance may, however, may be beneficial if you have a high-risk occupation.

Best for: Anyone on a tight budget with dependents who would financially suffer in the event of your impairment or death.
Pro: Cost — whether it’s offered as a benefit through your employer or you buy it on your own, policies are generally inexpensive.
Con: Limited coverage — AD&D covers you only under specific circumstances, whereas a traditional life insurance policy offers more comprehensive coverage.

Joint life insurance

Joint life insurance is a life insurance policy that covers two people. Most commonly, the joint policyholders are married or domestic partners, but they can also be business partners.

Most joint life insurance policies are permanent life insurance policies. Joint term life insurance policies, which expire after a set period, do exist but are less common.

Best for: Couples who don’t qualify for two individual life insurance policies.
Pro: Convenience — joint policies can cover two people if one of them doesn’t qualify for coverage, or if buying two separate policies is out of budget.
Con: Cost & access to death benefit — joint policies are usually more expensive than two separate individual policies, and depending on the type of joint policy, it might take longer for the beneficiaries to receive the death benefit.

There are two main types of joint life insurance policies:

First-to-die: The policy pays out after the first of the two spouses dies. It’s the most similar to an individual policy. It helps the surviving policyholder cover expenses after the loss of financial support.
Second-to-die: The policy pays out the death benefit once both policyholders die. Typically called a survivorship policy, it works best as a windfall to a dependent. It doesn’t provide any income replacement for your partner if you die before they do.

Short term life insurance

A short term life insurance policy provides some coverage while you’re waiting to get a longer-term policy. Policies last a year or less and protect you if you’re waiting for your insurer to come to a decision on your application.

Best for: People waiting approval for a longer-term policy.
Pro: Convenience — short term life insurance can provide temporary coverage.
Con: Duration & cost — can last only a few months and/or have increasing premiums.

No-medical-exam life insurance

No-medical-exam life insurance doesn’t require a medical exam to be approved. Instead, no-exam policies use past health records and other information about you to determine your premiums.

No-exam life insurance often refers to term life policies that don’t require the exam, but other types of insurance, like simplified issue, don’t require the exam, either.

These types of policies also come with shorter waiting periods between the moment you start the application process and the moment your policy becomes effective.

Best for: Anyone who has few health complications.
Pro: Time-saving — no-exam life insurance provides faster access to life insurance without having to take the medical exam.
Con: Older adults or people who have multiple health conditions might not be eligible.

Supplemental life insurance

Supplemental life insurance, also known as voluntary or voluntary supplemental life insurance, can be used to bridge the coverage gap left by an employer-paid group policy. In other words, it can be purchased to complement a group life insurance policy that doesn’t provide a large enough death benefit.

Best for: Anyone looking for easy access to coverage through their employer.
Pro: Convenience — guaranteed access to additional coverage when offered as a benefit by an employer.
Con: Limited coverage — you’ll usually need an additional term policy to get all the coverage you need.

Simplified issue life insurance

Simplified whole life insurance, a type of simplified issue life insurance, offers a small amount of permanent life insurance coverage to those who don’t qualify for other policies, and it doesn’t require a medical exam. Some companies offer simplified issue term life insurance as well, but it’s less common.

Best for: Seniors without major medical issues.
Pro: Convenience — simplified issue policies provide small coverage amounts for final expenses without having to take the medical exam.
Con: Cost — higher premiums for a low coverage amount. People over a certain age or with severe underlying medical conditions may not qualify.

Guaranteed issue life insurance

Guaranteed issue life insurance belongs to a category of policies called burial insurance, or final expense life insurance. It’s permanent coverage that’s best for people between age 45 and 85 who can’t qualify for a standard life insurance policy due to a serious medical condition or terminal illness. Application acceptance is near-guaranteed.

Best for: Seniors or people with terminal illnesses.
Pro: Near-certain approval — guaranteed issue provides access to a small death benefit to cover final expenses.
Con: Cost — high premiums for relatively low coverage amounts.

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How to find your best life insurance policy

Once you have an understanding of the types of life insurance, you can connect with a Policygenius expert to go over next steps as they pertain to your specific needs.

First, you’ll provide some basic information about your financial goals and responsibilities, as well as your age and health.
Then, they’ll be able to help you compare life insurance providers quickly and easily, and find the best life insurance company for your circumstances.

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Main life insurance types, at a glance

Frequently asked questions

What are the two main types of life insurance?

Term life and whole life are the two main types of life insurance. Term life insurance policies have an expiration date, providing coverage between 10 and 40 years, and whole life policies never expire. Whole life is a type of permanent life insurance that comes with a cash value component — in addition to the death benefit — which can be used to save, invest, or build wealth. Both its duration and cash value make whole life and other types of permanent life insurance many times more expensive than term life.

What is the cheapest type of life insurance?

Term life insurance is generally the most affordable type of life insurance because it’s simple and provides financial protection during your income-earning years. How much you pay for life insurance, however, will depend on your age, gender, lifestyle, and health.

What is the easiest type of life insurance to get?

Term life insurance is usually the easiest type of life insurance to be approved for — especially if you’re young and have no major health conditions — but your eligibility will depend on several factors, including your age, gender, lifestyle, and health.

What kind of life insurance do I need?

The right life insurance policy for you depends on your financial situation and your dependents. Term life insurance is the best choice for most people because it’s more affordable, but whole life insurance makes sense for people who need lifelong coverage or those looking for insurance with a cash value.

What types of life insurance are there?

There are many types of life insurance, but they usually fall into two main categories: term (which lasts for a set term) and permanent (which never expires). Whole, universal, indexed universal, variable, and burial insurance are all types of permanent life insurance. Permanent life insurance typically comes with a cash value and has higher premiums.

What is the most common type of life insurance?

Term life and whole life are the most popular types of life insurance. Whole life insurance premiums represented 38% of the individual U.S. life insurance market in 2022, according to LIMRA, the life insurance research organization. Meanwhile, term life premiums represented 19% of the market share in the same period (bearing in mind that term life premiums are much cheaper than whole life premiums).