Life insurance is a policy or contract between you and a life insurance company that can last for the rest of your life or for a specific time period. This contract guarantees that your beneficiaries will get a tax-free cash payment (also called the death benefit) when you die – this is provided you meet all the requirements in your policy. The exact amount they’ll get depends on how much coverage you buy and the type of policy you select.

Term life insurance

It’s temporary coverage that can last 10, 15, 20 or more years. It’s initially a cheaper option. But your premiums typically rise if you decide to renew your policy at the end of your term. Some term plans let you convert to permanent life insurance. Permanent insurance is more expensive than term, but most plans offer premiums that remain the same for the rest of your life.

Permanent life insurance

There are three types of permanent life insurance:

whole life, participating, and universal life. Some plans may also offer tax-preferred growth in your cash value and ways to increase the death benefit.