Term Life - This form of insurance is good only for a specific term. It may be 10, 15, 20, 25 or 30 years. It actually means what it says. At the end of the term, you can renew it for another term. Or simply, cancel the policy. The biggest disadvantage of renewing is that you will be older and may not be in as good a health as you used to be. Therefore, your renewed term insurance may cost you a fortune. 

Usually if you do not die before the term ends and you cancel the policy at the end of the term, all the money that you put into your life insurance will be gone. So if you do not die, the insurance company wins your money.

Now-a-days, however there are term insurance policies offered by very reputable companies that do refund all your premiums if you are still alive at the time of canceling the policy when the term ends. Now this creates a win-win situation. If you die, your beneficiary gets the benefit. If you live through the term, you get all the premiums including the cost of any riders minus any loans, if applicable, refunded.

There is an extra cost to put Return of Premium Rider to your term policy. If you can afford it, it is worth the money!

Most of the time you will buy this kind of insurance to protect your mortgage, cover for loss of income while kids are growing up, a temporary debt or if you cannot afford to purchase a more expensive, longer lasting kind of life insurance.

One of the biggest reasons why most of the people will not have it is because it usually will cost about four to six times more compared to a term policy, discussed above. It does, however, incur substantial cash values over time. You may borrow loans against these cash values.

Permanent life insurance enjoys a favorable tax treatment. Your cash value grows tax deferred, meaning that as long as the policy in force you do not pay taxes on any earnings.

Whole life insurance is more complicated than a term policy and therefore needs more explanation. One piece of advice is that you never buy this kind of insurance without fully discussing it with your life agent. For information sake, here is a glossary of terms used in whole life insurance.

Universal Life - Another kind of permanent policy. Usually more expensive than a Term Life but less expensive than a Whole Life. It can cover you for a lifetime with a limited or no cash value. Very often this kind of insurance is used in estate planning, when you want to make sure that your beneficiaries or heirs will have enough to pay the estate tax once you and your spouse are gone. Those policies are called Survivorship or Second-to-die.

Depending upon the need, want and affordability, you should choose a life insurance.