Introduction
In the U.S., life insurance is a big business. How big? Americans purchased about $3.3 trillion of new life insurance coverage in 2020, according to the American Council of Life Insurers (ACLI). That brings the total amount of life insurance coverage in the U.S. to about $20.4 trillion, based on ACLI data, and there are nearly 750 life insurance companies in operation domestically.

What Is Life Insurance?
Life insurance policies are designed to provide financial support to designated family members or loved ones, called beneficiaries, in the event of the insured person’s death. This payout, known as a death benefit, can be used to meet financial obligations (e.g., mortgage payments or college tuition), cover funeral and related expenses, or make up for lost income. Some policy types accumulate cash value that can be borrowed against or withdrawn under certain circumstances while the insured person is still alive.

How Many Types of Life Insurance Are There?
Term life is a temporary policy, while permanent life insurance is generally valid for your life span. There are pros and cons to both, and understanding the difference can help you select the best one for your needs. In addition, many life insurance companies sell “riders,” supplemental policies to cover specific events or needs, such as accidental death, end-of-life expenses, or long-term care.

Term Life Insurance
Term life insurance provides coverage for a defined period of time, or term, ranging from one to 40 years or to a specific age (commonly 65). The death benefit, or payout amount, is guaranteed as long as the policy is current. Once the term expires so do any associated benefits. In general, term policy premiums are much more affordable than permanent life coverage. Unlike permanent life insurance, however, the policy has no actual cash value or investment component. Premiums for term policies may remain fixed for the entire term or increase over time.