Most companies sell the five basic types of life insurance. Keep in mind that life insurance should be purchased from an established and reliable company because you pay in the present and expect protection long into the future.

Stock Insurance Companies

Stock insurance companies are profit-making corporations owned by stockholders who are not necessarily policyholders. Policies are usually sold as "nonparticipating" insurance, meaning they do not earn policy dividends for policyholders.

Mutual Companies

Mutual companies are owned by the life insurance policyholders. Mutual companies sell "participating" policies which means that dividends may be paid to the policyholder. These dividends are a result of the company charging too high a premium rate for a particular year. Investment earnings of the company may be higher than expected or company expenses could be less than planned. Dividends may be taken as cash, applied to the following year's premium, used to purchase paid-up additions to the policy, or left to accumulate interest to add to the cash value of the policy.

Professional, Fraternal and Religious Companies

Professional, fraternal and religious companies operate in a different state from which you live. Usually all business is done through the mail without the services of a local agent. Costs may seem low but the counseling advice from the agent is missing. It is wise to write for a specimen contract of the policy and examine it carefully before purchase.

Check with the State Insurance Commissioner's office to see if the company is licensed in your state.

Life insurance may be purchased as an individual life insurance purchase from a company agent or through a group plan where you are a member of that group.

Individual Life Insurance

Individual life insurance sold as an individual purchase from a company agent offers term, whole life, limited payment and endowment type policies. Medical examinations are usually required before coverage is issued. A certificate called a policy is given to the individual as proof of being insured.

Group Life Insurance

Group life insurance is generally offered as term insurance through the group from an insurance company and requires no medical examination. Premium costs are lower in a group plan because there are fewer operating expenses. As the employee leaves the job or retires, the protection ends. It is sometimes possible to convert the term group policy to a permanent form of insurance, if done within 30 days of leaving the group.