• Whole Life.
  Sometimes also called life or ordinary life, this policy has a fixed guaranteed rate and develops guaranteed cash values. There are two variations on traditional whole life:
  • Joint Whole Life: The policy insures two lives instead of one. Also called first-to-die coverage, the policy pays the death benefit to the surviving insured person when the first one dies. This is often purchased by a husband and wife.
  • Survivorship Life: The policy insures two people and pays a death benefit only when the second person has died. It is designed for married couples who want to provide funds to pay estate taxes that may be due after their deaths. Also called second-to-die coverage.
• Universal Life.
  This policy has more flexibility. Within certain limits, you can change the death benefit, the amount of premium and payment frequency. Unlike whole life, this is an "interest driven" policy, which normally pays a minimum guaranteed interest of 4% to 4.5%. If the interest rates are continuously low, additional premiums may have to be paid to avoid a lapse of coverage.
• Variable Life.
  This policy has death benefits and cash values that vary with the performance of an underlying portfolio of investments that you select. The death benefit and cash value are not guaranteed. They can go down as well as up, although there may be a guaranteed minimum death benefit.
• Variable Universal.
  This policy combines the premium and death benefit flexibility of universal life with the investment flexibility and risk of variable life.   Variable Universal Life (VUL) offers insurance protection combined with professionally managed investments to help you control your financial future.  A VUL policy can provide a number of tax advantaged opportunities, including:
• Income tax-free death benefits:  The death benefit paid to your beneficiaries is income tax-free, and if properly structured, you may be able to exclude the death benefit from your taxable estate.
• Tax-deferred accumulation:  Earnings within your life insurance policy have the opportunity to grow income tax deferred until you withdraw them from your policy.  Because your contract cash values are not subject to current taxation, they may accumulate faster.
• Nontaxable transfers:  VUL policies offer a choice of multiple investment options.  Generally, you can make transfers between investment options at no additional charge as your needs change without tax consequences.
• Tax-free access to cash:  tax advantaged policy loans and partial withdrawals can be taken without incurring income taxes.  And, the ability to access lower interest rate loans allows you to respond to financial demands as needs arise.

As your personal situations change (i.e., marriage, birth or a child or job promotion), so will your life insurance needs.  Care should be taken to ensure these strategies and products are suitable for your long-term life insurance needs.  You should weigh your objectives, time horizon and risk tolerance as well as any associated costs before investing.

Also, be aware that market volatility can lead to the possibility of the need for additional premium in your policy.  Variable life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, underlying fund charges and expenses, and additional charges for riders that customize a policy to fit your individual needs.

On all of the above policies, riders are available at an additional cost for the following coverages:

Disability waiver of premium.
A feature added to some life insurance policies providing for the waiver of premium, and sometimes payment of monthly income if the policyholder becomes totally and permanently disabled.

Accidental death.
A provision in a life insurance policy for payment of an additional benefit if death is caused by an accident. This is sometimes called double indemnity.

With Permission © Insurance Information Institute, Inc. - ALL RIGHTS RESERVED -