Term life insurance provides a stated benefit upon the policyholder’s death, provided that the death occurs within a certain specified time period. Unlike other types of life insurance, the policy does not provide any returns beyond the stated benefit. If the policyholder wishes, it can convert to a permanent policy at a later date.
Universal Life Insurance or Whole life is the standard insurance policy that remains in force for the policyholder’s lifetime. It offers both insurance death benefit protection and a cash value accumulation. Premiums do not rise as you grow older, but are substantially higher than term insurance premiums in the early years for the same coverage. The excess premium is built up as cash value on a tax-deferred basis.
Variable Universal Life
Variable universal life insurance or VUL, is both permanent coverage and an investment fund, with a third component being administrative costs. As the name suggests, VUL policies offer fluctuating benefits. Under most forms of VUL, you can vary the amount and timing of premium payments, subject to certain minimums. The insurance company invests the premiums and offers a choice of funds, in which the premium money will be invested. The amount of money beneficiaries will receive and the cash value of the policy depend on how well the insurance company invests the money.