Which type of life insurance policy generally has lower premiums?

Term life insurance is designed to provide coverage for a specific period, often ranging from one to thirty years. One of the primary reasons why it generally has lower premiums compared to other types of life insurance policies like whole life, universal life, or variable life insurance is its straightforward structure.

With term life insurance, the policyholder pays premiums for a set term, and if they pass away during that term, their beneficiaries receive a death benefit. There is no cash value accumulation component, which means the insurer does not have the added financial burden of managing these investments, thereby keeping costs lower.

In contrast, other policies like whole life insurance include a savings component that builds cash value over time, which contributes to higher premiums. Universal life insurance also has flexible premiums and cash value components, making it more complex and typically more expensive. Variable life insurance allows for investment options within the policy; this investment risk adds to the cost of the premiums.

Thus, the design of term life insurance, focusing purely on the risk of death during the policy's term without the additional costs associated with cash value or investment options, allows for significantly lower premiums.