A Guide to 15 Family Life Insurance Policy Options

Embracing a secure financial future comes with knowing your family is protected, no matter what tomorrow brings, not just knowing the numbers on a spreadsheet.

For many, family life insurance is the cornerstone of this security. However, the sea of options—from basic term policies to customizable policies that may include a cash value component—may feel overwhelming. Whether you want to protect a young family or build wealth, the policy you choose should align with your evolving needs.

This guide breaks down the 15 common types of family life insurance, helping you make the right decision for helping you understand options that combine protection with potential cash value features.

Types of family life insurance

Choosing a policy starts with knowing and understanding the core types of family life insurance. Below, we break these categories down to help ease your decision between temporary safety nets and lifelong policies that may include a cash value component.

Term life insurance options for families

Term life insurance is a straightforward way to temporarily protect your family’s income during your most expensive years. Amplify offers streamlined term life insurance policy options that may offer an expedited underwriting process, depending on eligibility, providing high coverage amounts for 10, 20, or 30 years.

1. Level term insurance

Best for: Young or fixed-budget families

Level term insurance is the most popular form of life insurance, where your premiums and death benefit stay the same for the duration of your policy. This type of family life insurance may provide peace of mind for younger, building families, especially new parents or those with fixed budgets.

Key features:

• Predictable cost and payout
• Simple to understand and budget for

2. Decreasing term insurance

Best for: Homeowners

Decreasing term insurance is also known as mortgage life insurance. With this type of life insurance for homeowners, the death benefit decreases over time, usually in line with your mortgage balance. While premiums stay level, the payout shrinks as your debt decreases, helping provide funds that could be used to pay off your mortgage if the unthinkable happens.

Key features:

• Designed to match shrinking debts
• Lower starting premiums than level term
• Death benefit often decreases on a set schedule

3. Increasing term insurance

Best for: Expectant or growing families

This type of family life insurance is designed for young professionals who expect their income and family needs to grow significantly. While the premiums may rise with increasing term insurance, the death benefit will also grow at set intervals, designed to help coverage keep pace with their rising standard of living.

Key features:

• Helps account for and offset inflation
• Coverage may rise at a fixed rate or with inflation indexes
• Starts cheaper than buying a large level policy upfront

4. Annual renewal term (ART)

Best for: Temporary, short-term coverage

For families between jobs or those who need short-term "bridge" coverage, ART is a one-year policy that can be renewed annually without a new medical exam. While its starting premiums are affordable, they increase every year as you age, making it a poor choice for long-term family security but a great "stop-gap" solution when you leave a job, are building a home, or are waiting to apply for a long-term policy.

Key features:

• Low cost at the start
• No long-term rates

Whole life insurance options for families

Whole life insurance offers permanent protection and a cash value component that grows based on the policy’s guaranteed elements and, if applicable, non-guaranteed dividends.

5. Level premium whole life

Best for: Lifelong coverage

For those who want lifelong protection and predictable costs, this is the standard whole life policy. You pay the same premium for life, and your beneficiaries receive a payout. Plus, it may be used as part of a legacy planning strategy, depending on individual tax circumstances, ensuring your heirs receive a tax-advantaged benefit because death benefits are generally income tax-free to beneficiaries under current law.

Key features:

• Fixed, predictable payments
• The death benefit is set
• Can borrow against the policy later

6. Limited payment whole life

Best for: Front-loaded insurance costs

With a “pay more now, pay nothing later” design, limited payment whole life policies are great for high-income families who want coverage in retirement without ongoing bills. With this policy, you pay higher premiums for a set period until the policy is paid. After that, you don’t pay any premiums, but the coverage and cash value growth continue forever.

Key features:

• Higher premiums during payment years
• No payments after a set period

7. Single premium whole life

Best for: Families with a lump sum

For grandparents or parents with a lump sum—like an inheritance or bonus—this policy allows you to fund the policy in full with one large, upfront payment. This is a powerful tool for transferring wealth, which may help with estate planning objectives, subject to policy ownership structure and applicable law.

Key features:

• No ongoing premiums
• Often used as a wealth transfer or estate planning tool
• Usually classified as a Modified Endowment Contract (MEC)

8. Modified whole life

Best for: Income growth expectations

Modified whole life policies start with lower premiums for an initial period, which then increase to a higher level. This helps younger families secure permanent coverage early, when their budgets are tighter. However, these policies work best for families who anticipate income increases in the next five to 10 years.

Key features:

• Cheaper in early years
• Planned premium jumps after a set period

9. Participating vs. non-participating whole life

Best for: Profit sharing

Families who may want to potentially receive non-guaranteed dividends based on company performance can consider participating vs. non-participating whole life policies:

• Participating policies pay "dividends" based on the company’s performance, which you could use to increase your death benefit or pay premiums.
• Non-participating policies have fixed benefits but lower, more predictable costs.

Though they’re not guaranteed, these dividends can help buy more coverage, reduce premiums, or be taken as cash.

Key features of participating policies:

• Can increase total death benefit and cash value over time

Key features of non-participating policies:

• May have lower premiums than participating policies 
• Set benefits
• No performance-based upside

Universal life insurance options for families

Universal life (UL) insurance policies combine the permanence of whole life policies with flexible premiums. Reaching a middle ground with term policies, UL policies could be your family’s protection with potential cash value flexibility—at the same time.

10. Fixed universal life

Best for: Flexible premiums with interest credited at a declared rate

A fixed universal life insurance policy earns credited interest at a rate declared by the insurer, subject to minimum guarantees. Offering the ability to skip a payment or lower your death benefit if your family's financial situation changes, these policies are great for families that are more risk-averse.

Key features:

• Lifelong coverage
• Payment adjustment, within limits
• Cash value grows at a declared interest rate 

11. Indexed universal life (IUL)

Best for: Long-term wealth and planning

Indexed universal life policies link cash value growth to a market index, allowing your cash value to grow based on market performance—with downside protection against negative index returns, subject to policy charges and minimum guarantees. These policies feature a floor to protect against market index losses and a cap on gains, and they may support long-term planning goals, depending on funding levels and policy performance. 

Key features:

• Growth tied to an index, subject to a cap
• Floor protects against market losses
• Flexible premiums and adjustable death benefit

12. Variable universal life (VUL)

Best for: Investing

With variable universal life, you can invest your cash value in sub-accounts similar to mutual funds. The direct market exposure of a VUL policy offers higher growth potential but also the risk of losing cash value if the market drops, making this a permanent policy option with direct market exposure and higher return potential, along with higher risk.

Key features:

• Highest growth potential of UL types
• Real market risk
• Flexible premiums and adjustable coverage
• Requires active monitoring

13. Guaranteed universal life (GUL)

Best for: Set death benefits

Guaranteed universal life policies function like term life insurance. These policies have little to no cash value growth, but the death benefit is received as long as the relatively low premiums are paid. Even with its limited growth, GUL policies are often lower-cost than other permanent life insurance options, depending on age and underwriting.

Key features:

• Little to no focus on cash value growth
• Premiums are structured to grant coverage until a specific age
• Less flexible for use as a financial asset

Joint life insurance options for families

Joint policies cover two people under one contract, which may be simpler and sometimes cheaper than two separate policies.

14. First-to-die life insurance

Best for: Families with shared financial obligations

First-to-die policies are joint life insurance policies that pay out when the first individual passes away. This provides the surviving partner with immediate liquidity to cover expenses, including mortgages or rent, childcare, and lost income. Plus, this option works as both a single- and dual-income insurance policy.

Key features:

• One policy covering two lives
• Death benefit paid at the first death
• The surviving spouse does not remain covered unless a new policy is purchased

15. Second-to-die life insurance

Best for: Estate building and inheritances

The payout for second-to-die policies occurs only after both individuals have passed. These policies are commonly used to provide heirs with the cash needed to pay estate taxes, ensuring the family home or business doesn't have to be sold.

Key features:

• Wealth transfer, not income replacement
• Typically used for inheritance planning

Why family life insurance matters

Family life insurance is more than just a payout—it’s about continuity after loss. The financial shock is often devastating, allowing these policies to bear the brunt of some of the financial grief by offering:

• Income replacement, ensuring the surviving policy members don’t have to choose between grieving and working double shifts.
• Debt elimination, using life insurance benefits to pay off debt and protect your family from undue financial stress.
• Wealth building, where some permanent policies may accumulate cash value over time, which may be used across your lifetime for things like college tuition, retirement, or emergency repairs.

These insurance policies aren’t just about the “what if” of a lost life, but also the wealth growth available to you while you continue to live your life.

How family life insurance works

With family life insurance, you can provide much-needed financial protection for loved ones. Most policies work this way:

1. Application: Choose a policy and amount, then apply. With Amplify, getting a quote and the application process are primarily digital, depending on product and eligibility.
2. Underwriting: The insurer assesses your health and lifestyle.
3. Payment: After approval, you pay a monthly or annual premium to keep the policy active.
4. Payout: Upon the insured's passing, the beneficiaries receive a lump sum that is generally income tax-free under current law.

This financial safety net could play a role in maintaining your family’s stability after loss. 

How much coverage do you need? 

To calculate the amount of insurance coverage your family will need, use the following DIME formula:

• D (Debt): Total of all debts (credit cards, car loans, etc.).
• I (Income): Your annual salary multiplied by the number of years your family needs it (e.g., 10–15 years).
• M (Mortgage): The remaining balance on your home.
• E (Education): Estimated cost of college for all children.

Add the totals for each letter together to estimate a potential coverage amount to discuss with a licensed professional.

Who should be covered? 

For family life insurance policies, both parents or caregivers are typically covered (even if one individual doesn't earn a traditional salary). Additionally, consider covering these individuals:

• Primary income earners
• Stay-at-home parents or caregivers
• Dual-income partners
• Dependents (sometimes)

The loss of income or help covering tasks like childcare, housekeeping, and transportation may lead to a massive financial burden, so many families consider covering those who assist with these tasks. 

Important life insurance add-ons to consider

Life insurance add-ons, or riders, are optional features for a base life insurance policy that customize how it works. These add-ons turn a standard life insurance policy into a more personalized financial safety net by covering scenarios beyond just death.

Common riders to consider:

• Child term rider: Provides a small amount of term life coverage for children, sometimes convertible to a permanent policy.
• Spousal rider: Adds coverage for a spouse to your own policy.
• Waiver of premium: The insurance company may waive premiums, subject to rider terms and qualifying conditions if the policyholder becomes disabled.
• Living benefits: May allow you to accelerate a portion of the death benefit, subject to eligibility requirements and policy terms, if diagnosed with a terminal or chronic illness.

How to choose the right life insurance for your family

Choosing life insurance for your family is about finding the policy that protects the people who depend on you. Here are the most important items to consider: 

1. Choose your policy type: Determine if you need temporary protection (a term policy) or permanent coverage that may build cash value (a permanent/universal policy).
2. Determine your term length: If choosing a temporary policy, decide the term length. Some consider it a good proxy to match the term to your longest debt, like a mortgage.
3. Identify your premium affordability: Choose a payment that fits comfortably in your monthly budget.
4. Look for insurer financial strength and reputation: Choose carriers with high ratings to prioritize the protection of your benefits.
5. Decide on optional riders: Consider your add-ons and customize the policy to your needs.
6. Prioritize flexibility for future family changes: Look for policies that allow you to adjust coverage as your family grows.

Considering each of these items can play a role in how you determine the right family life insurance plan for your household’s needs.

Protect your family’s future with Amplify

Navigating family life insurance doesn't have to be a solo journey—especially when the security of your partner or children is at stake.

At Amplify, we’ve reimagined our life insurance products to be more transparent and designed to support long-term financial planning goals. Whether you choose an affordable term policy or an IUL with cash value growth potential, our digital-first platform is designed to meet your family exactly where they are.

Get your personalized life insurance estimate in just a few steps (could be as quickly as minutes) and take the first step toward securing your family’s legacy.