HOW CAN SO many different products all be called life insurance? Here's a primer on the four basic types you're likely to run across as you search for the best policy.

Term

A term plan covers policyholders for a fixed span of time; this is pure life insurance, no MSG or other additives. It always costs much less than whole life policies, except the very advanced in age. There are two types of premiums: level term and annual renewable. Level-term premiums remain constant throughout the life of the policy and can be bought in increments up to 30 years, while premiums for annual renewable increase as you age. Ordinarily, level premiums are higher than renewable premiums in the early years of the policy and lower in the later years. These days the best bargains are to be found in level-term policies of 10 years and more.

Whole

Whole life combines term insurance with an investment component. A whole life policy has two elements: the mortality charge, the part of your premium that pays for the insurance coverage, and a reserve, the investment component that earns interest. As you age, the portion that goes into the reserve decreases while the portion that pays for the mortality charge increases. In addition to interest, many companies credit the reserve with an annual dividend, depending on the insurer's loss experience and investment performance.

Universal

Universal life insurance combines insurance with savings. The savings component, called an accumulation fund, earns interest monthly and is used to pay the mortality charge. The oft-repeated sales pitch for universal is that premiums are flexible -- as long as you pay enough to maintain the mortality charge, you can skip adding to the accumulation fund if money is tight. And if you contribute enough to the accumulation fund in the policies early years, it can throw off enough income to pay your premium in later years.

Variable

Variable life insurance combines a mortality charge with a savings vehicle that you choose from among a number of alternatives offered by your insurer. The savings vehicle is usually one of several investment portfolios that are structured like mutual funds. On average, most companies offer 10 different portfolios, including stock, bond and money-market funds. The insurers often manage these funds themselves, collecting fees for administering the insurance and managing the portfolios.

There are two basic types of variable life. One demands a fixed premium payment. The other, variable-universal life, has a flexible premium like universal life. Remember, though, that variable returns can fluctuate with the financial markets. If the stock market takes a hefty dive, you may find the cash-value portion of your policy in the tank. Variable life is not appropriate for people who are on a tight budget or are likely to need to tap their savings on short notice. Many variable buyers would be better off buying term and making a separate investment in a mutual fund.