• Most individuals understand the need for having a life insurance policy. However, choosing from the several kinds of policies can lead to confusion. While features and names vary among policies, life insurance policies fall into three general categories, but differ in options and cost. Your life insurance policy should match you and your family's life situation.
  
  

Whole Life

• This type of insurance covers you for life. Generally, premiums remain the same throughout the policy's life. The insurer usually invests some of your premiums, sometimes offering the proceeds to policyholders as dividends. Whole life insurance is more experience than other policies, but provides you with a sense of security knowing that your family will be provided for no matter when you die. According to SmartMoney, most insurers won't sell term life insurance policies to individuals over 65; whole life policies are often the only option.
  
  

Term Life

• Term life is usually the least complicated and expensive type of life insurance policy to purchase. SmartMoney states that term life costs about 50 percent less than whole life insurance, making it an affordable option for many. You can buy coverage for only a specific amount of time, and if you die during this time, your family receives the value of your life insurance policy. This kind of life insurance policy expires if you outlive the policy terms. There are two types of term life insurance: level term and decreasing term. Level term means that the value of the policy stays the same throughout the policy. Decreasing term is when the value of the life insurance policy decreases as you age. According to Bankrate.com, most experts recommend term life insurance policies to most individuals because of its value and simplicity.
  
  

Universal Life

• Universal life insurance is similar to whole life in that you are covered throughout your lifetime, as long as you pay the premiums. A portion of your premiums is invested by your insurance company, often in mortgages or bonds. After your death, your family receives the value of the life insurance policy or the value and cash value of the investment. In connection with the value of the investment account, your policy may decrease or increase.
  
  Under variable universal life insurance policies, you are allowed to choose the type of investments your premiums are used for. You can leave them in your account for a greater interest return later, or you can use them to offset the cost of your monthly premiums.