Northwestern Mutual

Life Insurance Terms & Definitions FAQ

Terms and Definitions

What is life insurance?

People buy life insurance so if they die, their family or loved ones will receive money that can help cover funeral costs, pay off debts and/or help maintain the way they are living today. When a person dies, the life insurance company pays the death benefit to the listed beneficiary. The two most common types of life insurance are term life insurance and permanent life insurance.

What is term life insurance?

Term life insurance provides a death benefit only if the insured person dies during a set period of time (say 10 or 20 years). Once that term expires, no death benefit is available. Learn more.

What is whole life insurance?

Whole life insurance is a type of permanent life insurance that has a fixed premium—or payment amount—for the life of the policy. This type of policy builds cash value that the policyowner may be able to use while alive. Learn more.

What is universal life insurance?

Universal life insurance combines the benefits of permanent life insurance (which grows cash value over time) with the convenience of an adjustable death benefit and adjustable premiums and payment schedules to meet your insurance and financial goals. Learn more.

What is variable life insurance?

Variable life insurance is a type of permanent life insurance that allows the policyowner to allocate funds among investment options provided by the insurer. The cash value of the policy reflects the performance of the selected investments. This type of insurance offers the potential for greater cash value and an increasing death benefit but comes with market risk. Learn more.