Life Insurance Policies
Term life
Term is pure death protection with no cash value. Forms: level, decreasing (matches mortgage balance), increasing, renewable (guaranteed renewal without proof of insurability, at higher age-based rates), convertible (exchange for permanent without evidence of insurability - conversion can attach a limit), annual renewable term (ART), and return of premium term (refunds premiums if the insured outlives the term). Trap: converting a term policy means the new policy's premium is typically based on the insured's attained age unless the original policy specifies original-age conversion.
Whole life
Whole life is permanent, level-premium coverage with guaranteed cash value and guaranteed death benefit. Variants: ordinary/straight life (paid to 100/121), limited pay (20-pay, life paid-up at 65 - same total outlay compressed, higher premium, faster cash value), and single premium. Features: nonforfeiture options, dividend options (participating only), policy loans and automatic premium loan.
Universal and variable life
Universal life separates the cost of insurance (which rises with age) from accumulation in a cash value earning current interest (often with a guaranteed minimum). It offers flexible premiums and an adjustable, though not guaranteed, face amount. Option A is a level death benefit; Option B (also called increasing) adds the cash value to the face amount. Variable life and variable universal life place cash value in a separate account invested in mutual-fund-like subaccounts: the owner bears investment risk, and the product requires a prospectus and securities licensing. Indexed UL credits interest tied to an index with caps, participation rates, and floors (0% protects against negative index returns, but policy charges can still erode cash value).
Other structures: modified/graded premium (lower early premiums), survivorship (second-to-die) (pays on the second death - useful for estate taxes), juvenile and family policies, and group/credit coverage.
Rule of thumb: if the owner bears market risk, it is a variable/securities product; if the insurer guarantees it, it is not.