If you’ve started researching life insurance, you’ve probably noticed how quickly it gets confusing — term, whole life, universal, indexed, variable, guaranteed issue. And if you call a typical agency, you’ll only hear about whichever products they’re contracted to sell.
We’re independent brokers with access to 40+ carriers, which means we can show you the full picture. After 18+ years helping clients navigate these decisions, the question we hear most is: “What is the best type of life insurance policy to get?”
The honest answer: it depends on what you’re trying to accomplish. The right choice comes down to whether you need coverage for a season or a lifetime — and whether you want your premiums to build equity you can access while living.
This guide breaks down the types of life insurance that actually matter, what each one does, and which scenarios each one fits best.
TL;DR: Types of Life Insurance at a Glance
Two categories: Term (temporary, no cash value, lowest cost) and Permanent (lifetime coverage, builds cash value, higher cost).
Term Life: Covers you for 10–30 years. Best for income replacement and mortgage protection during working years. 99% of policies expire without paying a claim.
Whole Life: Permanent coverage with guaranteed cash value growth, level premiums, and dividends. The only policy type with three guarantees. Best for lifetime protection and wealth-building infrastructure.
Universal Life (IUL, VUL, GUL): Permanent coverage with flexible premiums. IUL links growth to market indices with downside protection. VUL offers direct market exposure. GUL provides the cheapest permanent death benefit with minimal cash value.
The Bottom Line: Term insurance rents protection temporarily. Permanent insurance builds equity you can access while living. Most people benefit from a combination of both.
Why Trust This Guide
This guide was written by Jason Kenyon, J.D., CEO and Co-Founder of Insurance & Estates — an independent brokerage with access to 40+ top-rated carriers. With over 18 years of experience in financial services and estate planning law, Jason and his team have helped thousands of clients navigate life insurance decisions ranging from simple term policies to sophisticated infinite banking and Volume-Based Banking strategies. This guide is reviewed by licensed professionals and updated regularly to reflect current market conditions.
Table of Contents
- U.S. Life Insurance Market Data (2024–2025)
- Term vs. Permanent: The Two Categories
- Permanent Life Insurance Types
- Term Life Insurance Types
- How to Choose the Right Type
- Frequently Asked Questions
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U.S. Life Insurance Market Data (2024–2025)
2024 Life Insurance Sales by Type
| Insurance Type | Market Share | Total New Premium (2024) |
|---|---|---|
| Whole Life | 36% | $5.8 billion |
| Indexed Universal Life (IUL) | 23–24% | $3.8 billion |
| Term Life | 19% | $3.0 billion |
| Variable Universal Life (VUL) | 14–15% | $2.2–$2.4 billion |
| Fixed Universal Life | 7% | $1.1 billion |
| Total (all types) | 100% | $15.9–$16.2 billion |
Source: LIMRA 2024 U.S. Individual Life Insurance Sales Report
2025 Update: Through the first nine months of 2025, total new annualized premium reached $12.7 billion, up 12% year over year. Whole life policy sales surged 18% in Q3 2025 — the biggest growth since at least 1990. IUL hit a record $3.2 billion YTD (up 19%), while VUL premium jumped 30%. Source: LIMRA Q3 2025
Term vs. Permanent: The Two Categories That Matter
Every life insurance policy falls into one of two categories: term (temporary protection) or permanent (lifetime coverage with cash value). Understanding this distinction is the first and most important decision you’ll make.
Think of it like housing. Term insurance is renting — you’re covered while you pay, but when the lease ends, you walk away with nothing. Permanent insurance is owning — your premium payments build equity you can access while living, and the coverage never expires.
| Feature | Term Life | Whole Life | GUL | IUL | VUL |
|---|---|---|---|---|---|
| Lifetime Coverage | ✗ | ✓ | ✓ | ✓ | ✓ |
| Builds Cash Value | ✗ | ✓ | Minimal | ✓ | ✓ |
| Guaranteed Cash Value Growth | ✗ | ✓ | ✗ | Floor Only | ✗ |
| Level Premiums | During Term | ✓ | ✓ | Flexible | Flexible |
| Tax-Free Policy Loans | ✗ | ✓ | Limited | ✓ | ✓ |
| Market-Linked Growth | ✗ | ✗ | ✗ | ✓ | ✓ |
| Downside Protection | N/A | ✓ (Guaranteed) | N/A | ✓ (Floor) | ✗ |
| Dividend Potential | ✗ | ✓ (Participating) | ✗ | ✗ | ✗ |
| Best For | Temporary income replacement, mortgage protection | Guarantees, financial infrastructure, banking strategies | Estate planning, legacy on a budget | Growth potential with downside protection | Aggressive growth, direct market exposure |
✓ = Feature included | ✗ = Not available | Availability may vary by carrier
Permanent Life Insurance Types
Permanent life insurance provides lifelong coverage and builds cash value — accumulated money inside the policy that grows tax-deferred and can be accessed through policy loans or withdrawals while you’re still alive. This is what separates permanent insurance from term: your premiums build equity, not just protection.
Whole Life Insurance
Whole life insurance is the only policy type that offers three guarantees: a guaranteed death benefit that never decreases, guaranteed level premiums that remain fixed for life, and guaranteed cash value growth that accumulates tax-deferred. With participating policies from mutual companies, dividends can accelerate growth beyond those guarantees.
Cash value builds through regular premium payments, paid-up additions that increase your death benefit, and dividends reinvested into the policy. The best dividend-paying whole life policies may produce internal returns exceeding 5% long-term — and you can access that cash value through policy loans without triggering a taxable event.
Beyond the Basics: Most people evaluate whole life as an investment alternative and dismiss it. But sophisticated wealth builders use it differently — as financial infrastructure that provides liquidity, tax advantages, and a private banking system they control. This is the foundation of Infinite Banking and what we call Volume-Based Banking. If conventional financial advice has left you sensing something’s missing, these strategies are worth exploring.
Whole life comes in several variations: limited pay options (7-Pay, 10-Pay, 20-Pay) let you complete payments in a set period, while modified whole life starts with lower premiums that increase later. Understanding how much whole life insurance costs and reading a whole life insurance illustration are critical steps before purchasing.
Universal Life Insurance
Universal life insurance offers more flexibility than whole life in two key ways: adjustable premiums let you decide how much goes toward death benefits vs. cash value, and payment flexibility allows you to skip payments if sufficient cash value exists. Cash value grows tax-deferred and can be accessed through loans or withdrawals.
The tradeoff for that flexibility is fewer guarantees. Unlike whole life, universal life’s cash value growth rate can change over time, and the policy can lapse if cash value drops too low to cover internal costs. This makes policy management more involved than whole life’s set-it-and-forget-it structure. Universal life is the parent category for three specialized policy types: GUL, IUL, and VUL.
Guaranteed Universal Life (GUL)
Guaranteed universal life provides lifetime death benefit protection at lower cost than whole life by minimizing cash value accumulation. GUL can be structured to last until specific ages — 90, 95, 100, 105, 115, or 121 — but only GUL to age 121 provides truly permanent coverage.
GUL is ideal for clients who need a permanent death benefit for estate planning or legacy purposes and are less concerned with cash value accumulation or living benefits. It’s the most affordable way to guarantee a death benefit that never expires.
Indexed Universal Life (IUL)
Indexed universal life links cash value growth to stock market indices like the S&P 500, Nasdaq, or international markets — without direct market investment. Returns are governed by three mechanisms: a participation rate (what percentage of index gains you receive), a cap rate (maximum annual return), and a floor (minimum guaranteed return, typically 0–2%).
IUL offers market-linked upside with downside protection, but the complexity of these products means policy design matters significantly. A poorly structured IUL can underperform; a well-designed one can serve as a powerful accumulation tool. For a deeper dive on whether IUL fits your situation, see our guides on whether IUL is worth it and how IUL compares to whole life for infinite banking.
Variable Universal Life (VUL)
Variable universal life combines life insurance with direct investment exposure through sub-accounts similar to mutual funds. VUL offers the highest growth potential of any permanent policy type — and the highest risk. Unlike IUL, there is typically no floor protecting your cash value from market losses.
VUL requires both life insurance and securities licenses to sell due to its investment component. While the death benefit won’t fall below a specified minimum, cash value can decline with poor market performance. VUL fits clients with higher risk tolerance who want market exposure inside a tax-advantaged wrapper.
Survivorship Life Insurance
Survivorship life insurance (also called second-to-die or joint life) covers two people — typically spouses — with the death benefit paid upon the second death. This structure makes it less expensive than two separate policies and ideal for estate planning and wealth transfer, where the surviving spouse doesn’t need the death benefit but heirs do.
Survivorship policies also offer less stringent underwriting when one insured is significantly healthier than the other, making coverage accessible to couples where one spouse might otherwise be uninsurable.
Asset-Based Long-Term Care Life Insurance
Asset-based hybrid policies combine life insurance with long-term care benefits: if you need care, the policy pays for it; if you don’t, your beneficiaries receive the death benefit. Unlike standalone long-term care insurance, premiums are fixed and won’t increase over time. These policies solve the biggest objection to traditional LTC coverage — the fear of paying premiums for decades and never using the benefit.
Key Takeaway: Permanent life insurance builds cash value you can access while living — but the type you choose determines your guarantees, growth potential, and risk exposure. Whole life offers the most guarantees. IUL and VUL offer more growth potential with more risk. GUL offers the cheapest permanent death benefit. The right choice depends on whether you’re building financial infrastructure or simply securing a death benefit.
Term Life Insurance Types
Term life insurance provides pure death benefit protection for a specific period — typically 10, 15, 20, 25, or 30 years. It’s the most affordable life insurance option, making it popular among younger families seeking income replacement or mortgage protection. The tradeoff: term builds no cash value, and 99% of policies expire without paying a claim.
Level Term Life Insurance
Most term policies feature level premiums — the same payment amount for the full duration of the policy. Available in 5, 10, 15, 20, 25, 30, or even 40-year terms. The death benefit remains constant throughout. Watch out for “level” term policies that increase rates every five years — always read the fine print and verify the premium is guaranteed level for the full term.
Convertible Term Life Insurance
Convertible term policies allow you to convert your coverage into permanent insurance — whole life or universal life — without proving insurability. No medical exam, no health questions, and you maintain your original health classification. You can typically convert all or a portion of your coverage before the term expires or by a specified age (usually 65–70).
This is critical if your health declines after purchasing the term policy. When shopping for term, evaluate which permanent policies will be available for conversion later — not all carriers offer the same conversion options, and the quality of the permanent product you can convert into matters as much as the term premium you pay today.
Return of Premium (ROP) Term
Return of premium term refunds your premiums if you outlive the policy. Example: a $500,000 policy with $5,000 annual premiums for 20 years returns $100,000 if you survive the term. Returns are considered return of principal, not earnings, making them tax-free. ROP premiums are significantly higher than standard term, which is why this option is less common today.
Decreasing Term
Decreasing term features a death benefit that declines over time while premiums remain level. Often used to match a decreasing debt like a mortgage balance. Coverage terminates when the death benefit reaches zero. For most people, a standard level term policy is a better choice — it gives you the same or more coverage at each point and the flexibility to use the death benefit for anything, not just a specific debt.
Key Takeaway: Term life is the most affordable way to get coverage, but 99% of policies expire without paying a claim. If you choose term, prioritize convertible policies — they give you the option to lock in permanent coverage later without proving insurability, even if your health changes. For a detailed comparison, see our guide on whole life vs. term life insurance.
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How to Choose the Right Type of Life Insurance
The right policy depends on what you’re trying to accomplish, not which product has the lowest premium. Here’s a practical framework:
| If Your Goal Is… | Consider… | Why |
|---|---|---|
| Maximum coverage on a budget | Convertible term | Highest death benefit per dollar with future flexibility |
| Building wealth with guarantees | Whole life (overfunded) | Three guarantees + dividends + tax-free access via policy loans |
| Private banking system / infinite banking | Whole life with PUAs | Cash value becomes your personal line of credit with uninterrupted compounding |
| Market-linked growth with protection | IUL | Index-linked upside with 0% floor; flexible premiums |
| Cheapest permanent death benefit | GUL to 121 | Lifetime coverage at lower cost than whole life; minimal cash value |
| Estate planning for couples | Survivorship + ILIT | Second-to-die structure minimizes cost; trust keeps proceeds out of estate |
| Long-term care protection + death benefit | Asset-based hybrid | Fixed premiums; benefits either way — care or death benefit |
| Tax-free retirement income alternative | LIRP (whole life or IUL) | No contribution limits, no RMDs, tax-free distributions via loans |
Many of our clients don’t choose one type — they build a strategy that combines term and permanent coverage. A convertible term policy handles immediate protection needs while a properly structured permanent policy builds long-term financial infrastructure.
Finding the Right Policy for Your Situation
The best life insurance policy isn’t the cheapest one — it’s the one that matches your goals. Term insurance serves a purpose, but permanent insurance builds equity that compounds for decades. The question isn’t just “how much coverage do I need?” but “what do I want my premiums to accomplish?”
At Insurance & Estates, we take time to understand your situation and show you the full spectrum of options — not just the products we’re contracted to sell. Whether you need straightforward protection or want to explore how life insurance can serve as financial infrastructure, we’ll help you build a strategy that fits.
Ready to find the right life insurance strategy for your goals? Schedule a complimentary strategy session with our team.
Frequently Asked Questions About Types of Life Insurance
What are the main types of life insurance?
There are two main categories: term and permanent. Term life insurance provides temporary coverage for a set period (10–30 years) with no cash value — it’s pure death benefit protection at the lowest cost. Permanent life insurance provides lifetime coverage and builds cash value you can access while living. Permanent types include whole life (guaranteed growth), universal life (flexible premiums), indexed universal life or IUL (market-linked growth with a floor), variable universal life or VUL (direct market exposure), and guaranteed universal life or GUL (cheapest permanent death benefit with minimal cash value).
Which type of life insurance builds cash value?
All permanent life insurance policies build cash value: whole life, universal life, IUL, and VUL. Term life insurance does not. The key difference is how that cash value grows. Whole life offers guaranteed growth plus potential dividends. IUL links growth to market indices with downside protection through a 0% floor. VUL ties growth directly to market sub-accounts with no floor. GUL technically has cash value but it’s minimal by design — GUL prioritizes a guaranteed death benefit over accumulation. For most clients focused on building accessible wealth, whole life and IUL are the primary options.
What is the difference between term and whole life insurance?
Term life insurance covers you for a specific period and only pays a death benefit — it’s the most affordable option but expires without value if you outlive it. Whole life insurance provides lifetime coverage, builds guaranteed cash value, and pays dividends with participating policies from mutual companies. Whole life premiums are higher but fixed for life, and the cash value can be accessed through tax-free policy loans. Term rents protection; whole life builds equity. For a detailed comparison, see our guide on whole life vs. term life insurance.
What type of life insurance is best?
There’s no single best policy — it depends on your goals. Term is best for affordable, temporary coverage during working years when you need maximum death benefit per dollar. Whole life is best for lifetime coverage with guaranteed cash value growth, especially if you’re building financial infrastructure through strategies like infinite banking. IUL is best for market-linked growth with downside protection and flexible premiums. GUL is best for permanent death benefit protection at the lowest cost. Many clients combine term and permanent coverage to address both short-term and long-term needs.
Is whole life insurance a good investment?
Whole life insurance isn’t designed to compete with investments — it serves a different purpose. On rate of return alone, whole life typically yields 3–5% long-term, which underperforms the stock market’s historical average. But whole life provides guarantees the market doesn’t: guaranteed cash value growth, a guaranteed death benefit, and guaranteed level premiums. Sophisticated wealth builders use it as financial infrastructure — providing liquidity, tax advantages, asset protection, and a private banking system they control. The question isn’t whether whole life beats the S&P 500 — it’s whether you need what whole life uniquely provides.
Can you convert term life insurance to whole life?
Yes, if you have a convertible term policy. Conversion lets you transform your term coverage into permanent insurance — whole life or universal life — before the term expires or by a specified age (usually 65–70). The key benefit is converting without proving insurability: no medical exam, no health questions. You maintain your original health classification even if your health has significantly declined. You can convert all or part of your coverage. When shopping for term, the conversion options matter as much as the premium — not all carriers offer the same permanent products for conversion.
How much life insurance do I need?
A common guideline is 10–12 times your annual income, but the right amount depends on your specific situation. Consider your debts (mortgage, loans, credit cards), income replacement needs, future expenses (college tuition, retirement for spouse), and final expenses. A 35-year-old earning $100,000 with a mortgage and young children may need $1–1.5 million, while a 55-year-old with a paid-off home and grown children may need far less. The best approach is calculating your actual financial obligations — see the human life value approach for a more precise methodology.
What is indexed universal life (IUL) insurance?
IUL is a type of permanent life insurance that links cash value growth to stock market indices like the S&P 500 — without direct market investment. Returns are governed by a participation rate (percentage of gains you receive), a cap rate (maximum annual return), and a floor (minimum guaranteed return, typically 0–2%). IUL offers market-linked upside with downside protection and flexible premiums, but policy design matters significantly. For more detail, see our complete IUL guide and our assessment of whether IUL is worth it.
3 comments
Bonnie LaGambo
Just want to get a price on term life insurance
Insurance&Estates
Hi Bonnie, you can get life insurance quotes for term life and whole life here: https://www.insuranceandestates.com/life-insurance-quotes/
You can also give us a call at 877-787-7558 to speak to a life insurance agent.
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