Types of Life Insurance Policies
Essentially there are only two basic types of life insurance policies: term and 
permanent. All life insurance is a variation or combination of these two basic types. To match a product to a need requires an understanding of the basic form, its strengths, and weaknesses.
Term life policies cover a limited time period and are pure insurance plans. If death does not occur within the policy period, the policy does not pay.
Permanent policies pay no matter when death occurs, by combining pure insurance with a financial plan. They act as insurance plans if the insured dies prior to completing a financial plan. However, the insured will accumulate savings if the insured does not die.
What are the Types of Life Insurance Policies?
Life insurance policies fall into four basic classes:
- Group life insurance.
- Credit life insurance.
- Industrial or home service life insurance.
- Individual or ordinary life insurance.
Group Life Insurance
A specialized type of policy is group life insurance which covers the lives of employees or other group members. The group policy is issued to the employer, association, or labor union, and individual certificates of insurance are issued to each covered person. Benefits are payable to the insured person's designated beneficiary or estate. Group life insurance is usually issued in the form of annual renewable term coverage. Group term rates are based on the overall experience of the insured group and not on the ages or health of the individual group members.
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Credit Life Insurance
Credit life insurance may be issued on an individual or group basis to cover the lives of debtors for the benefit of creditors. It is written specifically to protect the balance of an unpaid loan if the debtor should the prior to paying the indebtedness.
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Industrial Life Insurance
This form of life insurance is usually written for small amounts and is characterized by frequent premium payments (monthly or weekly) which are collected by the agent. Home service policies are a variation of this concept, which are sold on a debit payment plan, such as automatic bank drafts. The term industrial life insurance is considered interchangeable with debit or home service insurance.
Individual or Ordinary Insurance
Most often, agents will be recommending some form of ordinary, or individual, life insurance to prospects. The term "ordinary insurance" is sometimes used to describe individually-owned life insurance. Some ordinary life policies are issued on a participating basis, which means they pay dividends. Others are issued on a nonparticipating basis, and do not pay any policy dividends.
The category known as ordinary life insurance generally consists of three types of policies and their variations:
- Term insurance
- Whole life insurance
- Endowments
- Term Life Insurance vs Whole Life Insurance
We will explore each of these, as well as some of their variations, in detail in the following sections.
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