Life insurance can generally be classified as either “term life,” “cash value life,” or a combination of the two. Term life coverage is typically less expensive and less complex. These policies pay only once – with a specified death benefit when the insured dies – and only if the person dies during the specified term that the coverage is in force. Cash value life policies typically provide a variety of features and benefits in addition to the death benefit, and they typically cost more. The key feature of all cash value life insurance is a savings component that accumulates over time and may be withdrawn, invested, or borrowed against during the policyholder’s lifetime, depending on the policy terms.

In addition to a basic life insurance policy form, your agent or company will likely offer a choice of “riders” that can be added to a policy to extend, limit, or modify the coverage. Riders that increase coverage typically increase the premium.

Term life policies take their name because coverage only lasts for a specific period of time – such as one, five, 15, or 20 years – or until the insured reaches a certain age. The cost of term life generally increases as you get older. For people under age 40, term life generally provides the largest death benefit per premium dollar of any type of life insurance.

Term life policies typically don’t include a savings component. If you die during the term, the insurance company pays the amount of the death benefit specified by the policy. If you don’t die during the term, the policy lapses, no benefit is paid, and you must either renew or purchase another type of coverage if you wish to keep life insurance.

Term life can be a good choice for young families with children. You may only need coverage until the children are old enough and financially able to provide for themselves.

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