What are the two main types of life insurance policies?

The two main types of life insurance policies are term life insurance and whole life insurance. Term life insurance provides coverage for a specific period, typically ranging from one to thirty years. If the insured passes away during this term, the designated beneficiaries receive the death benefit. However, if the insured outlives the term, the policy typically expires without any cash value or payout.

Whole life insurance, on the other hand, offers coverage for the entire lifetime of the insured, as long as premiums are paid. This type of policy builds cash value over time, which the policyholder can borrow against or withdraw, adding an investment component to the life insurance coverage.

These two categories form the foundation of life insurance, with other types and variations, such as universal and variable life insurance, built upon these core structures. Understanding the distinction between term and whole life insurance is crucial when selecting an appropriate policy based on coverage needs and financial objectives.