A safeguard to provide for family and ensure continued financial management of an estate after a policyholder’s death, life insurance can be purchased in the form of term or permanent plans. Term coverage offers protection for a set period of time. The policyholder makes premium payments every month to continue coverage, and should his or her death occur during the protection period, the benefits are paid out. However, if the policy’s term expires before the policyholder passes, the insurance company’s responsibility to pay out the benefits is void.
Of the two types of policies, permanent life insurance has a higher cost, but its benefits remain active for as long as the policy’s premiums are paid, thus eliminating the risk of losing invested money. As part of such policies, insured individuals accrue a cash value balance they can cash out or use to pay premiums. This tax-deferred feature also provides policyholders with flexible loan options. Types of permanent insurance include whole life and universal life.