Life insurance seems like it is becoming more and more a necessity, rather than a nice-to-have.

In the past, you only needed to get life insurance if you had beneficiaries and if you wanted to ensure that those beneficiaries ended up with fewer headaches upon your death.

But nowadays, life insurance has become a more complicated gambit. It isn't only about protecting your loved ones from unnecessary financial hardships upon your death, but it has also become a sort of investment tool.

There are many different types of life insurance that you can take advantage of, to ensure that your financial portfolio is a holistic one. Let's take a look at the types of life insurance, and the pros and cons of each one.

The Different Types of Life Insurance for You to Consider

The reason that you need to consider your life insurance options, is because you need to make sure you pick the one that is best for you and your specific needs. Picking the same one as the one your colleagues chose is not the right way to do this.

Let's look at the different types of life insurance out there, so you can have a better idea of your life insurance options.

1. Term Life Insurance

The cheapest way to buy insurance is to get term life insurance, where you would be able to buy insurance in periods of 1, 5, 10, 15, 20, 25, or 30 years. You can get coverage for the period of time you think you would be alive for.

The great thing is that this insurance policy is cheap to buy, but the con is that you might outlive the policy, resulting in your beneficiaries getting nothing. Coverage amounts vary depending on the policy that you buy.

2. Whole Life Insurance

As long as you keep on paying the premiums, whole life insurance will last until your death. Your premiums will stay the same until your death, and the death benefit amount doesn't change no matter how much money you put in.

The great thing about this policy is that you get a guaranteed rate of return on the policy's cash value, which is why a lot of people use this life insurance as an investment as well. It's a two-in-one kind of deal.

The con is that it is definitely more expensive than the other types of insurance out there.

Modified Whole Life Insurance

There is a modified life insurance policy as well, where there is a waiting period of 2-3 years. In this waiting period, in case of accidental death, only the premium payments plus interest are paid to the beneficiaries.

After the waiting period, the full benefit is paid out, for any reason. The great thing about this kind of insurance is that you can still get it, even if you have previous health conditions, even serious health issues.

The premiums for this kind of plan are high because people with serious health risks end up using this kind of insurance.

3. Universal Life Insurance

There are two kinds of universal life insurances. Let's look at them in detail below.

Guaranteed Universal Life Insurance

In this insurance policy, your death benefits are guaranteed until the age you choose, which could be 95 or 100. There is no inherent cash value in the policy, and the premiums don't change throughout the life of the policy.

But the con is that the insurers do demand that you pay the premiums on time. Even a single missed payment might mean that you forgo the entire policy, which means all your payments go down the drain.

Indexed Universal Life Insurance

In this life insurance, the policy's value is indexed to a certain stock market index, like the S&P 500. The great thing about this policy is that if the stock market does well, you will see significant gains.

But every policy also has investment caps, which means you aren't taking full advantage of the market gains. Also, this kind of investment life insurance requires much more monitoring than other kinds.

There is also the 'participation rate' which is the rate at which dictates how much your cash value participates in any gains. For example, if your participation rate is 70%, and the S&P 500 index goes up 10%, you get a 7% return.

If the index value goes down, then you don't lose any cash value, but you get a zero rate of return. As you might imagine, you would have to do some serious number crunching before taking this policy on.

4. Variable Life Insurance

There are variable life insurance policies and variable universal life insurance policies. They are both tied to the value of an investment account, such as bonds or mutual funds.

The variable life insurance has fixed insurance premiums, and a guaranteed death benefit, regardless of the value of the investment account.

Whereas, the variable universal life insurance, the premiums are adjustable, and the death benefits are not guaranteed.

You can make significant gains in your policy value, if the stock market does well, but it does mean that you need to be a lot more hands-on with the policy, monitoring the policy value.

5. Group Life Insurance

This one is pretty self-explanatory. If you are working with a well-established employer, they usually offer insurance coverage to their employees, as part of the workplace benefits.

Premiums are offered to the group as a whole, rather than on an individual basis.

The employers offer the basic life insurance coverage in these cases, which can be upgraded to one with better benefits if you so choose. The extra premiums would have to be paid by you.

The Best Life Insurance for You Depends on Many Factors

Choosing a life insurance policy isn't as easy as picking one from a basket of contenders. It requires some serious thought and calculations.

That's why a lot of people choose to forgo the complications by hiring an insurance agent to guide them through the process. They will be able to help you figure out the best life insurance policy for you from the different types of life insurance out there.

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