Indexed Universal (IUL)

Indexed universal life (IUL) allows the owner to allocate cash value amounts to either a fixed account or an equity index account. Policies offer a variety of well-known indexes such as the S&P 500 or the Nasdaq 100. IUL policies are more volatile than fixed ULs, but less risky than variable universal life policies because no money is actually invested in equity positions. IUL policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit.

 

Term Life

Term life insurance is basic coverage that generally does not build life insurance policy cash value. Consumers typically buy term life insurance to provide death benefit protection for a specific period of time.   Premiums for term coverage are usually initially lower than other types of life insurance because the policy only provides a death benefit for a defined period. Later, some term insurance policies can be extended or converted into another type of coverage.

 

However, if you renew or convert your coverage, your new premium will probably be higher than your previous coverage, and can continue to increase as you grow older.

 

Whole Life

Whole life insurance provides a lifetime death benefit for a set premium amount and builds cash value you can use while you’re living. The strength of a whole life insurance policy is that it provides guaranteed cash values and benefits in return for fixed premiums. A trade-off to consider is that a whole life policy may build cash value at a lower rate than alternative coverage options.

 

Variable Life

Variable is a permanent life insurance policy with an investment component. The policy has a cash value account, which is invested in a number of sub-accounts available in the policy. A sub-account acts similar to a mutual fund, except it's only available within a variable life insurance policy.

 

This type of insurance is generally the most expensive type of cash-value insurance because it allows you to allocate a portion of your premium dollars to a separate account comprised of various instruments and investment funds within the insurance company's portfolio such stocks, bonds, equity funds, money market funds and bond funds. In addition, because of investment risks, variable policies are considered securities contracts and are regulated under the federal securities laws; therefore, they must be sold with a prospectus.