Life Insurance Policies
Term life
Term provides pure protection for a stated period with no cash value. Variations: level (constant face), decreasing (face declines, often used with mortgages), increasing, renewable (guaranteed renewal without evidence of insurability, at higher attained-age rates), convertible (change to permanent without proof of insurability; premium reflects the new policy), and return of premium (refunds premiums at the end of the term, at a higher cost).
Permanent forms
Whole life is level-premium permanent coverage with guaranteed cash value, guaranteed death benefit, and guaranteed premium; participating policies pay dividends (not guaranteed). Universal life unbundles the elements: the premium above expense and mortality charges goes into a cash value credited with interest; the policy stays in force as long as the cash value covers monthly cost of insurance, which rises with age. Option A is a level death benefit; Option B increases the death benefit by the accumulated cash value. Variable life and VUL place cash value in separate accounts (subaccounts) - the owner bears investment risk and the product is a security requiring appropriate registration. Indexed UL credits interest tied to an index subject to a cap, participation rate, and floor.
Specialty and business uses
Modified/graded premium (lower early premiums), juvenile, family income, joint/survivorship (first-to-die vs second-to-die), group term (typically one-year renewable term, conversion privilege), and business uses: key person, buy-sell funding, split dollar, executive bonus (162 bonus).
Traps: term never builds cash value (except ROP designs); UL illustrations are not guarantees - cost of insurance can consume cash value; variable products can lose principal; no policy is both the cheapest death benefit and a guaranteed savings vehicle.
Rule of thumb: match the product to the need horizon - temporary need, term; permanent need, permanent.