Term or permanent life insurance, in plain words

The deal

What you're buying

Life insurance pays money, called a death benefit, if you die while the policy is in effect. In exchange, you pay premiums while you're alive.

Term

Term life insurance covers a set period of time. It pays a death benefit only if the insured person dies during that period.
Term insurance generally costs less than permanent insurance, especially in the early years of a policy.
Term premiums usually stay the same for the whole term. If you renew when the term ends, your premium goes up.
Most term policies don't build up cash value you can use later.
A convertible term policy lets you switch to a permanent policy later without taking a medical exam or answering health questions.

Permanent

Whole life insurance gives you a fixed amount of coverage that lasts for your entire life.
In a whole life policy, cash value comes from the premiums you pay, minus fees and insurance costs. You can borrow against it.
Universal life is a type of cash value insurance with flexible premiums. You can change how much you pay, as long as you pay enough to keep the policy in force.
With universal life, if your premiums don't cover the cost of insurance, the difference comes out of your cash value. If the cash value hits zero, the policy could lapse.
In a variable life policy, your cash value depends on investments you choose, such as stock and bond funds. These policies have the most potential to build cash value and the most risk of losing it.

Your age

Life insurance is generally cheaper when you're young and gets more expensive as you get older.

Source: Washington Insurance Commissioner, how life insurance works
Health, smoking and risky hobbies

A company can charge you more if you have health conditions, smoke, or do risky hobbies like skydiving or rock climbing.

Source: Texas Department of Insurance, Life insurance guide
Skipping the health questions

A policy that doesn't ask for detailed health information usually costs more and gives you less coverage than one that does.

Source: NAIC, Life Insurance Buyer's Guide (2026)
Once you have it

Once a policy is issued, the insurance company can't cancel it because your health changes.

Source: NAIC, Life Insurance

Death benefit: The money the policy pays when the insured person dies.
Premium: What you pay to keep the policy in force.
Beneficiary: The person, trust or estate you name to receive the death benefit.
Contingent beneficiary: Who gets the money if your first beneficiary has died.
Term: A policy that covers a set number of years.
Permanent: A policy meant to last your whole life, like whole or universal life.
Cash value: Money that builds inside some permanent policies, which you can borrow against.
Underwriting: How an insurer decides whether to sell you a policy, and at what price.
Free look: The days after you get a policy when you can return it for a full refund.
Contestable period: The early years when the insurer can review your application answers if you die.
Lapse: When a policy ends because it wasn't paid for, or its cash value ran out.
Illustration: The insurer's chart of how a policy's values and benefits could change over time.
Surrender fee: A charge some policies take if you cancel early.