Term life insurance, also known as pure life insurance, is life insurance that guarantees payment of a death benefit during a specified term. Once the term expires, the policyholder can either renew for another term, convert to permanent coverage, or allow the policy to terminate. Term life insurance policies provide a stated benefit upon the death of the insured, provided that the death occurs within a specific period.

Term life policies have no value other than the guaranteed death benefit. There is no savings component as is found in a whole life insurance product. The policy's purpose is to give insurance to individuals against the loss of life. All premiums cover the cost of underwriting the insurance. As a result, term life premiums are typically lower than permanent life insurance premiums

Endowment Life Insurance Provides Two Products for the Price of One

These policies couple term life insurance with a savings program. As the policyholder, you choose how much you want to save each month and when you want the policy to mature. Based on your monthly contributions, you're guaranteed a certain payout, called an endowment, when the policy matures. You can then use this endowment for your child's college tuition, fees, books, living expenses and other costs. If you should die before the policy matures, your child will receive the payout as your death benefit and will still have the anticipated money for college.

The endowment life insurance policy promises a risk-free, guaranteed return on a guaranteed date as long as you make the fixed monthly payments.

A life insurance policy that a company purchases on a key executive's life. The company is the beneficiary of the plan and pays the insurance policy premiums.

Key person insurance is needed if the sudden loss of a key executive would have a large negative effect on the company's operations. The payout provided from the death of the executive essentially buys the company time to find a new person or to implement other strategies to save the business.

In a small business, the key person is usually the owner, the founders or perhaps a key employee or two. The main qualifying point would be if the person's absence would sink the company. If this is the case, key person insurance is definitely worth consideration.

How Keyman Insurance Works

For key person insurance policies, a company purchases a life insurance policy on its key employee(s), pays the premiums and is the beneficiary of the policy. In the event of death, the company receives the insurance payoff. These funds can be used for expenses until it can find a replacement person, pay off debts, distribute money to investors, pay severance to employees and close the business down in an orderly manner. In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy.