| Life insurance, at its core, is a means to protect | | | | whole life policy, or maintain it so that benefits are |
| the financial security of one's survivors. It is | | | | paid to survivors upon the policyholder's death. |
| generally thought of as a way to provide income | | | | Whole life insurance policies were long "the norm" |
| replacement for a wage earner's survivors in the | | | | in the insurance industry. |
| event of death. Life insurance is purchased from | | | | Universal Life Insurance |
| an insurer by making regular payments of | | | | Universal Life Insurance is considered a more |
| premiums during the life of the insured. Upon the | | | | flexible approach to life insurance. The required |
| death of the insured, designated beneficiaries | | | | regular premium amount can vary as long as the |
| receive a financial benefit. | | | | policy has a cash value in excess of the policy's |
| Although all life insurance policies maintain those | | | | costs. The insured can alter the policy's future |
| consistent characteristics, there are different | | | | payout while the policy remains in force, making it |
| means to achieving the same end. Four distinct | | | | a flexible insurance solution for those who may |
| types of life insurance have been developed and | | | | have more complicated or rapidly-changing needs |
| are in common usage. | | | | than can be addressed with term or whole life |
| Term Life Insurance | | | | solutions. |
| Term life insurance is probably the most basic | | | | Variable Universal Life Insurance |
| form of life insurance. Term insurance is | | | | Variable Universal Life Insurance takes the |
| purchased for a specific period of time (the term). | | | | flexibility of universal life coverage and adds to it |
| The length of the term can vary considerably. | | | | by providing investment choices. The policy's cash |
| There are term policies that are effective for well | | | | value is not based simply on an interest rate |
| over twenty years, whereas some only involve a | | | | determined by the insurer. Instead, the policy's |
| one-year term. A regular premium is paid | | | | value is based upon the performance of various |
| throughout the term. If the insured dies at any | | | | investments. The insured allocates his premiums |
| point during the term, the designated beneficiary | | | | among a series of investment options with a |
| receives the death benefit. If one survives the | | | | variable universal life insurance policy. |
| term, however, there is no payout and the policy | | | | Although all insurance policies do share common |
| simply ends. | | | | characteristics, the four different types of |
| Whole Life Insurance | | | | insurance policies have some marked differences. |
| Whole life insurance has a long history and | | | | Each type of insurance policy has advantages and |
| maintains great popularity. The cost of premiums | | | | limitations. For some, a simple term policy will |
| is guaranteed for the entire time the policy in | | | | more than suffice to meet their life insurance |
| place. As premiums are paid, the insured | | | | needs. Others may benefit considerably from a |
| accumulates a cash value for the policy, with the | | | | more full-featured insurance policy that includes an |
| insurer determining the interest rate applied to | | | | investment component and the ability to alter the |
| that cash value. One may either "cash out" their | | | | nature of benefits and the premium. |