The two main types of life insurance include permanent life insurance and term life insurance.  While both can equally cover a person in the event of a death, they have their differences that distinguish one from the other.   When comparing permanent and term life insurance, one should consider the premium, cash value, death benefit, and duration of coverage of each type of insurance. When taking into consideration the impact on each of these issues in the decision about life insurance, there will be a better choice in some cases.

The most noticeable difference between permanent and term life insurance is the premium being roughly four times higher for permanent life. The most important impact of this is on cash value, death benefit, and the duration of coverage. While permanent life builds cash value which can be borrowed against and provides coverage for a person's entire life, term life insurance builds no cash value and is for a specific period of time.  While this seems to have no benefits, it actually helps those with little available funds to afford life insurance, even if it is a little amount.  Plus, term life insurance borrowers have the option of converting to permanent life insurance once the term ends.

With permanent life insurance, a person can choose Whole, Universal or Variable. Deciding between them will depend on what a person's needs are.  Whole life insurance has the highest and most stable premiums and provides guaranteed cash value and death benefits. Universal life provides a lower, more variable premium than whole life insurance and while retaining most of the death benefit, the cash value earnings is based on an annually-determined credited interest rate which depends heavily on the performance of a person's invested premiums. There is no guarantee as to what that credited interest rate will be from year to year and, as a result, there is no guarantee on the cash value of the policy. With Variable life, both the death benefit and the premium are determined by the performance of a person's invested premiums and they have greater control over the investments. While Variable life has the greatest potential of cash value increase, there is still no guaranteed cash value. 

As with Permanent life, there are three choices among Term life, including level term, annual renewable, and decreasing term. For the most part, the types of insurance are self explanatory. Level term provides level death benefits and premiums for the determined duration of coverage. This varies, so a person should check the individual policy before deciding. Annual renewable policies offer the highest coverage for the lowest premium, though that premium will go up every time it is renewed until the term life insurance policy is surrendered. Because of this increase, most advisors suggest that no annual renewable policy should be used for more than three years. Decreasing term life is a policy with level premiums sometimes called Mortgage Protection Insurance because it provides the greatest amount of death benefit at the beginning of the policy, when one would owe the most on their mortgage. Decreasing term life insurance can protect a large purchase like a home and ensure that the family has what was intended to pay off in their lifetime. However, the longer a person lives with a Decreasing term policy, the less the benefit will be when they die.