When it comes to life insurance it may be a bit confusing for a person that is new to the whole concept especially when dealing with different types of life insurance policies. But it's not that complex as you may think and the basics are easy to grasp. First of all you have to learn the three main types of life insurance products that you will find on the market:

• term life insurance
• whole life insurance
• universal life insurance

Term life insurance is the simplest form of life insurance products you will be offered and it is regarded as having the best value for money ratio. As the name suggests term policies are designed for a specific term during which they are active and will pay out a death benefit if the policyholder passes away. In case when the policyholder is alive and well after the term has expired there won't be any payouts. Some term policies offer the option of having the term prolonged after the initial one expires or the policy to be converted into a whole life one.

Whole life insurance policies are usually much more expensive than term policies as they eventually have a 100% payout rate. As you've already guessed, whole life policies will cover the person for their entire life as long as the premiums are paid. Such policies usually offer additional investment potentials as they can be borrowed against after a certain period of time. Whole life policies are very attractive for people having substantial long term plans and looking for means to use their money with benefit.

Universal life insurance policies are often regarded as the mix of term and whole life insurance. To put it simple a typical universal policy represents a term policy based on a tax-differed savings account that can be used for accumulating funds over a long term. Such policies have become very popular in the past few years as many people see a good alternative to typical retirement funds in them. In fact, you can use the money accumulated on the account when you retire but that will require quite a long term of policy duration in order to gain any substantial savings.

So it all boils down to your actual needs. Deciding which type of life insurance is best for you requires you to analyze your personal insurance needs. If you simply want to get coverage for a short term while going through a financially vulnerable period then term life insurance will work best for you. In case you need substantial coverage and an additional financial source for your family you can use as an investment tool then whole life insurance is what you need. And if you want to get both the coverage and the financial benefits of a tax-differed savings account that will replace you retirement fund then you should certainly get universal life insurance.