Life Insurance Policy Types and Features
Term insurance
Term provides pure protection with no cash value. Level term keeps a fixed face amount; decreasing term matches a shrinking need such as a mortgage; increasing term rises over time; annually renewable term (ART) has a rising premium each year. Renewable term lets the owner continue coverage to a stated age without evidence of insurability; convertibility allows exchange to permanent coverage without proof of insurability, using either attained-age or original-age rates.
Whole life
Level premium, guaranteed cash value, and coverage to age 100 or 121. Straight life pays to 100; limited-pay (20-pay, life paid-up at 65) compresses premiums; single premium is one deposit and is usually a modified endowment contract. Participating policies pay non-guaranteed dividends; nonparticipating policies have a lower base premium.
Universal life
Flexible premiums and an adjustable death benefit, with cash value credited at a current rate but never below the guaranteed minimum. Cost of insurance and expenses are deducted monthly. Option A keeps a level death benefit; Option B adds cash value to the benefit. Underfunding risks lapse unless a no-lapse guarantee applies.
Variable and indexed products
Variable life and variable universal life invest in a separate account; the policyowner bears the investment risk, and the product is a security requiring a prospectus and a securities-registered producer. Indexed universal life credits interest based on an index subject to a cap, participation rate, and a floor (often 0%).
Other designs
Survivorship (second-to-die) pays at the second death for estate planning; modified/graded premium starts low and steps up; juvenile policies insure children; endowment matures at a stated age.
Rule of thumb: if the owner bears investment risk, it is variable (a security); if the insurer guarantees the cash value, it is whole life.