Life Insurance Policies
Policy types
Term insurance provides a death benefit for a set period and generally no cash value. Level term has a constant face amount; decreasing term falls over time, often used with mortgages; increasing term rises. Renewable term lets the insured continue coverage without new evidence, usually at higher premiums; convertible term lets the insured exchange to permanent coverage, typically without new evidence. Whole life is permanent, with fixed premiums, a guaranteed death benefit, and guaranteed cash value. Limited-pay and single-premium whole life compress premiums into fewer years. Universal life separates mortality, expense, and interest; premiums and death benefits can be flexible, but poor interest crediting can erode cash value. Variable life and variable universal life invest in separate accounts and are securities; they require a prospectus and securities registration. Indexed universal life credits interest by a formula tied to an index, subject to caps and floors.
Traps
Term is not permanent and has no cash value. Universal life is not automatically a security; variable universal life is. Convertible term usually does not require evidence of insurability, but the conversion deadline matters. A policy illustration is not a guarantee unless guaranteed elements are specifically shown. Also distinguish face amount from cash value and death benefit from living benefits.
Rule of thumb
Match duration to need: temporary needs such as mortgage or child-rearing years usually point to term; lifelong needs such as estate liquidity or final expenses point to permanent coverage. If the client wants market-linked cash value, consider variable products only with suitable risk tolerance and proper licensing.