There are several different types of life insurance policies. It’s important to choose a policy that fits well with your situation and objectives. Here’s a summary of some of the policy types people often choose.
This is the simplest form of life insurance. Because its death benefit protection is limited to a specific number of years, its coverage is temporary. If you live past the term, your coverage ends. Term life insurance is relatively inexpensive because it is temporary and doesn’t provide additional benefits while you are living.
These policies provide death benefit protection and are designed with flexibility in mind. The policy owner can change the amount and frequency of premium payments and death benefit can be adjusted down or up (with evidence of insurability). Policy cash values are credited with interest at a rate declared by the insurance company which can change from year to year.
Indexed Universal Life
These policies provide death benefit protection and combine the flexibility of universal life with cash value crediting based in part on the performance of an equity market investment index (e.g. the S&P 500® index). Sometimes multiple indexes are used. The result is a flexible policy with enhanced potential for cash value growth.
Variable Universal Life
These policies provide death benefit protection and provide the flexibility of universal life insurance with cash value growth potential based on the investment performance of a group of variable investment options which are only available in variable universal life insurance policies issued by life insurance companies. Some of these options are conservative while others can be more aggressive. Because these policies allow the policy owner to choose from many variable investment options, they have more customizable investment potential.
VUL policies are subject to market and investment risk; account growth is not guaranteed and it will change in value. In addition, there is a possible loss of the principle amount invested.
Survivorship Universal Life
These policies provide death benefit protection and are designed to insure two people simultaneously (usually a husband and wife). They pay a death benefit when the last of the two insureds (the survivor) dies. Premiums and death benefits can be managed with the flexibility of traditional universal life policies and cash values can potentially be credited with growth in a variety of ways. Premiums on survivorship universal life insurance policies are often less expensive because death benefits are paid when the second insured dies rather than the first insured.
|Coverage||Cash Value||Flexible Premium Payments||Control of Allocations of Cash Value||Guaranteed Return on Allocations of Cash Value|
|Term||fixed amount of time||no||no||no cash value||no cash value|
|Indexed Universal Life||lifelong*||yes||yes||yes||yes|
|Variable Universal Life||lifelong*||yes||yes||yes||depends if the policy offers a fixed account|
*provided policy is not allowed to lapse or mature/expire