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