Life Insurance Policies
Policy families
Term insurance provides pure death protection for a set period and generally has no cash value. Level term keeps the face amount and premium level; decreasing term lowers the face amount; annually renewable term increases premiums with age. Renewable term allows continuation without new evidence; convertible term allows exchange to permanent coverage. Whole life provides lifetime coverage, level premiums, guaranteed cash value, and guaranteed death benefit. Universal life separates mortality, expense, and interest components and allows flexible premiums, but guarantees may be limited. Variable life and variable universal life invest in separate accounts and require securities registration. Indexed universal life credits interest based on an index subject to caps, participation rates, and floors.
Specialty products
Joint and survivor policies cover two lives and pay on the last death. Juvenile policies insure a child and often include a guaranteed insurability option. Modified and graded-premium policies start with lower premiums but may build cash value or face amount slowly.
Traps
Term is not a savings vehicle. Universal life is not fully guaranteed unless the policy says so. Variable products are securities as well as insurance. Do not call indexed universal life a direct stock-market investment; index credits are formula-based and usually have a floor.
Rule of thumb
Match the product to the need: temporary need-term; lifelong need with guarantees-whole life; flexible premium and cash-value focus-universal life; market participation with securities risk-variable life.
Worked example
A client needs 20 years of coverage while children are dependent. Level term is usually the lowest-cost fit. If the client values guaranteed lifetime coverage and level premiums, whole life may fit better, though it costs more.