Life Insurance Policies
Term insurance
Term is pure protection with no cash value. Varieties: level, decreasing (mortgage protection), increasing, renewable (no new evidence, higher premium), convertible (to permanent without evidence of insurability), and return-of-premium. If a client's health has deteriorated, the answer is usually convertibility.
Whole life
Straight whole life has a level premium to the maturity age with guaranteed cash value. Limited-pay (20-pay, paid-up at 65) compresses premiums; single premium is one payment and is automatically a MEC. Modified and graded premium policies buy low early premiums at the cost of lower early cash value.
Universal and variable
Universal life separates the cash account from the cost of insurance, with flexible premiums and an adjustable death benefit. Option A (level) keeps a level death benefit with growing cash value; Option B (increasing) adds cash value to the death benefit and carries a higher cost of insurance. Weak interest credits can cause lapse unless the guaranteed minimum is paid. Variable life and variable universal life invest in separate accounts and are securities: the producer needs a FINRA registration and must deliver a prospectus. Indexed universal life credits interest from an index with a floor and cap.
Specialized policies
Survivorship (second-to-die) pays on the last death and suits estate planning; joint life pays on the first; juvenile policies insure children; family income pays a monthly income for a set period plus the face amount; endowment matures at a stated age.
Rule of thumb: guarantees and forced cash value = whole life; flexibility with the risk on the owner = universal; market risk plus a prospectus = variable.