Life Insurance Policies
Term insurance
Term covers a stated period with no cash value. Level term keeps a constant face amount; decreasing term (often used for mortgages) shrinks; increasing term grows; annually renewable term (ART) steps up in cost each year. Renewable provisions guarantee the right to continue without evidence of insurability, at higher premium; convertible provisions let the insured exchange for permanent coverage. Trap: conversion is usually allowed without proof of insurability, but the premium is based on the attained age unless the policy specifies the original age.
Permanent insurance
Whole life (ordinary/straight) offers guaranteed level premium, guaranteed death benefit, and guaranteed cash value, with the insurer bearing investment risk. Limited-pay and single-premium versions compress the payment period. Universal life separates the elements: the insurer credits interest, deducts cost of insurance and expenses, and the policy stays in force as long as cash value covers charges. Option A (level death benefit) keeps a constant face; Option B (increasing) adds cash value to the face. Variable and variable universal life place cash value in a separate account, shift investment risk to the owner, and require a prospectus and securities licensing. Indexed universal life credits interest tied to an index with caps, floors, and participation rates. Endowments mature at a stated age when cash value equals face.
Other categories
Group life (master contract, certificate, typically one-year renewable term), credit life, juvenile and family policies, adjustable life, and joint/survivorship (second-to-die) coverage. Participating policies pay dividends, which are a return of surplus, not guaranteed.
Rule of thumb
Variable products = securities registration plus separate account plus owner bears risk. UL question example: with Option B, the death benefit equals the specified amount plus accumulated cash value.