Types of Life Insurance

Term Life Insurance

Term life, the simplest and least expensive type of policy. It has only one function -upon the insured one's demise, to pay a specific lump sum to the person designated as the beneficiary.
A term life policy, is pure insurance with no cash value. The death benefit and the policy limit are the same. Hence, a $200,000 policy pays a $200,000 death benefit. The policy protects your family to provide money they can invest to replace your salary, as well as, cover funeral arrangement expenses.

Often referred to as cash value policies, other types of life insurance provide both a death benefit and a cash value account. Their premiums are larger than term life premiums, because, in essence, they fund a savings account in addition to buying insurance. They include: Whole Life, Variable Life, Universal Life, Universal variable Life.

Whole Life or Ordinary Insurance

Whole life insurance provides permanent, long-term protection for your dependents | beneficiaries while building a cash value account. With this type of insurance, the insurance company manages the policies' various accounts.

Inclusions:
Pays a death benefit to the named beneficiary on the policy, as well as, offers a low risk cash value account and tax-deferred cash accumulation.

Provides a fixed premium which can not increase during the overall course of the policy holder's lifetime so long as pre-set payments continue to be made.

Allows the insurance company to exclusively manage the cash value account outlined within the policy.

Provides the option to receive cash dividends from the policy or apply them to reduce premium payments.

Gives the policy holder the right to withdraw from the policy during the course of his/her lifetime.

Occlusions:
Doesn't offer the flexibility whereby the policy holder may invest in separate accounts such as: money market, stock, and bond funds.



Variable Life
Variable life insurance provides permanent protection to the policy holder, plus offers account flexibility for the more risk-oriented policy holder.

Inclusions:
Pays a death benefit to the named beneficiary, as well as, provides policy holder a cash accumulation that is low-risk and tax-free.

Allows death benefits to vary in relation to the funds and dividends generated by the cash value account.

Allows the policy holder to borrow from the policy during the course of his/her lifetime.

Occlusions:
Offers no guarantee as to the amount of cash value that will accumulate during the course of one's lifetime.

Does not offer premium flexibility.

Does not offer face amount flexibility.

Universal Life or Adjustable Insurance

Universal life insurance provides permanent protection for your dependents that is more flexible than whole or variable life.

Inclusions:
Pays a death benefit to the named beneficiary, as well as, provides policy holder a cash accumulation that is low-risk and tax-free.

Allows the policy holder to earn interest at market rates on his/her cash value account.

Permits the policy holder to borrow on or withdraw from the policy during the course of his/her lifetime.

Allows premium flexibility.

Offers face amount flexibility.

Occlusions:
Doesn't offer the flexibility whereby the policy holder may invest in separate accounts such as: money market, stock, and bond funds

Doesn't allow the account flexibility to split your money among different accounts or to move your money between accounts.



Universal Variable Life Insurance

Universal Variable provides the policy holder with the most control of the cash value account policy feature than any of the other types of life insurance.

Inclusions:
Pays a death benefit to the named beneficiary, as well as, provides policy holder a cash accumulation that is low-risk and tax-free.

Offers separate accounts in which the policy holder may invest in such as money market, stock, and bond funds.

Offers premium flexibility.

Allows policy holder to make withdrawals from or borrow on the policy during the course of his/her lifetime.

Occlusions:
Stipulates that if the contract is terminated during the early years, less money will paid out than under the whole life insurance contract.
As the amount paid out on the policy is contingent upon the success of the various investments, it requires the policyholder to devote time to managing the multiple fund accounts.

Doesn't work well with small premium amounts because your premium must cover both the policy holder's insurance, as well as, as the multiple cash value accounts.