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Are There Different Types Of Permanent Life Insurance?

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Permanent insurance is a catchall phrase for a wide variety of life insurance products that contain the cash-value feature. Within this class of life insurance, there are a multitude of different products.

Whole life or ordinary life is the most common type of permanent life insurance. It provides you with the certainty of a guaranteed amount of death benefit and a guaranteed rate of return on your cash values. You will have a level premium that is guaranteed to never increase for life. Another valuable benefit of a participating whole life insurance policy is the opportunity to earn dividends. Dividends are a way for the company to share part of its favorable results with policyholders. These dividends are expected after the second policy year, but they are not guaranteed.

Variable life insurance is offered via a prospectus and provides death benefits and cash values that vary with the performance of a portfolio of underlying investment options. You can allocate your premiums among a variety of investment options offering different degrees of risk and reward: stocks, bonds, combinations of both, or a fixed account that guarantees interest and principal. This type of insurance is for people who are willing to assume investment risk to try to achieve greater returns.

Universal life insurance is offered via a prospectus and allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. You can also reduce or increase the death benefit more easily than under a traditional whole life policy. With universal life, you get the certainty of a guaranteed minimum amount of death benefit, as long as premiums are sufficient to sustain that death benefit. Any guarantee relies on the claims paying ability of the issuing insurance company.

Variable universal life insurance is similar to universal life. It is a flexible premium, permanent life insurance policy that allows you to have premium dollars allocated to a variety of investment options, including a fixed account. The policy generally provides income tax-free death benefit, has a cash value that grows tax-deferred, and is accessible through policy loans or withdrawals. The policy allows for increase or decrease of the policy coverage and premium changes to the life insurance benefit option.

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