These policies build cash value as premiums are paid and time goes by. The cash value, less any loans or withdrawels, is paid along with the death benefit death of the insured. These types of products provide coverage to age 100.

Whole Life

Often referred to as ordinary or straight life, this insurance has a guaranteed death benefit, cash values, level premiums, and it may pay dividends.

Universal Life

This type of insurance was created in 1977 to offer the insured more flexibility. The premium payments and death benefit can vary. Premiums are credited with interest on a monthly basis. This interest is usually a fixed amount without much variance. The cost of insurance along with other internal policy charges is deducted on a monthly basis from the policy cash value. You have the flexibility to increase or decrease premiums within certain limits, without losing coverage, as long as the cash value is adequate to cover insurance costs.

Variable Life

This is a form of whole life with scheduled premiums in which you designate how your cash value monies are invested. This is done by selecting from investment funds that the company offers.

Variable Universal Life

Like universal life, you chose how and when to pay premiums, as long as there is adequate cash value in the policy. You also direct how your paid premiums are invested.

Advantages

• Guaranteed death benefit
• Cash accumulation that grows tax-deferred.
• Competitive interest rates on cash value.
• Option to borrow against cash value.
• A provision that all policy proceeds pass to beneficiaries income tax-free.

Disadvantages

• High-required premium levels make it hard to buy enough coverage.
• It may be more costly than term insurance if you do not keep the policy long enough.