Term insurance
Also known as temporary insurance, it covers a person against death for a limited time, the term. For example, the term might be until children are grown, or until college is paid for, or until retirement. You pay for the coverage period and at the end of the term the contract, or policy, expires.
Term insurance works just like auto or homeowners insurance. If no claims are made against the policy during the term, you don't receive any benefits after the policy expires.
Usually term insurance is more recommended for young families with large financial obligations. Reason being the lower premiums will enable them to purchase sufficient coverage to protect against loss of income. And they can invest additional discretionary investment funds in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than life insurance contracts.
Whole Life insurance
Also known as permanent insurance, is permanent and does not expire as long as the premiums are paid on time. It provides coverage similar to term insurance, but it also provides an investment vehicle. A portion of the premium goes toward insuring your life while the other goes toward an investment account. When the policy expire, you can take back cash benefits and gains from the investment portions. Usually these policies contribute to part of the retirement funds.
