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Life insurance can be confusing and complicated and many people don't understand what type of policy they need. There are two main types of life insurance - term and whole life. A universal policy is another type of whole life policy that is also available, but this article will deal with the differences and uses of term and whole life policies. There are different reasons to purchase either of these two types of life insurance, and it is important to know what these reasons are and what type of policy or policies that you might need.

First of all, term insurance is the least complicated of the two. It has a specified amount of death benefit for a specific amount of time. It can be for five years, ten years, or even twenty years, but it is important to remember that the older you are when you purchase it, the more expensive the term insurance will be. It is also important to know that if any health issues arise that both term and whole life policies may not be issued, or may be issued at higher rates. However, it is always cheaper than what a whole life insurance policy will cost for the same amount of death benefit.

A whole life policy insures a person for the duration of their life. As long as the premiums are paid, the insured will be protected for the rest of their life. Whole life policies also build up a cash value that the insured can borrow against if they wish to. A whole life policy will be more expensive than a term life because of the fact that it guarantees coverage of the insured no matter what health issues arise after the policy goes into effect, and because the owner has the ability to borrow money against the policy. This money can be paid back, or it can be kept and the balance can be deducted from the current death benefit. For example, if a policy has a death benefit of $10,000 and the owner borrowed $2,000, the owner can repay the $2,000 and restore the death benefit to $10,000, or he can simply keep the loan, not repay it, and the death benefit would then be $8,000 rather than $10,000.