There are two basic types of life insurance policies: permanent life insurance, and term life insurance. Permanent life insurance provides coverage for the entire life of the policy holder, so long as the contractual obligations of the policy are not violated, for instance by failing to pay the premiums. Besides financial compensation for the loss of life, a permanent life insurance policy is also a form of investment which may be drawn upon during the life of the policy holder.

In contrast, affordable term life insurance is often referred to as "pure insurance" because it offers only coverage for loss of life, and is not considered an investment vehicle. For this reason among others, term life insurance is generally less expensive than permanent life insurance for the same amount of coverage. Alternatively, affordable term life insurance offers more coverage for the same amount of money.

Most term life insurance policies offer a benefit upon death for a specific period of time ranging from one year to thirty years. Some term life insurance policies instead provide coverage up until the covered party reaches a certain age between sixty five and ninety years old.

Unlike permanent life insurance, affordable term life insurance policies have to be renewed periodically, or else the coverage will lapse, like car insurance would. The pay structure for affordable term life insurance is divided up into two essential kinds: "level premium" and "yearly renewable."

Yearly renewable policies offer coverage for one year at a time. The amount of the premium will not change during that time. However, once the policy is renewed, the premium will increase annually as the covered individual grows older. For the first few years, annually renewable insurance continues to be the most affordable. However, after the first few years, the premiums could increase drastically.

Like yearly renewable policies, the premium on most life insurance policies with longer terms does not change while the policy is in effect. Policies in which the premium remains unchanged during the entire term of the policy are considered level premium policies. Because the premium stays level for a longer period of time, these policies often offer the most coverage for the least money overall.

But some term life insurance policies that have longer terms assess escalating premiums, often in increments of five to ten years. Before you buy life insurance of any kind, it's smart to review carefully the insurance rates as opposed to the value of death benefits.