Types of Life Insurance

Whole life insurance is a type of permanent life insurance that provides coverage for the entirety of a person's life, as long as premiums are paid

Whole life policies accumulate cash value over time, which grows at a guaranteed rate set by the insurance company. A portion of the premium payments goes toward building this cash value, which can be borrowed against or withdrawn during the policyholder's lifetime (though doing so may reduce the death benefit).

• Lifetime Coverage: As long as premiums are paid, coverage lasts for the policyholder's entire life.
• Fixed Premiums: Premiums are generally fixed, meaning they don’t increase over time.
• Cash Value Accumulation: Over time, the policy builds cash value, which can be accessed by the policyholder. This can be a useful financial resource.

Term life insurance is a type of life insurance that provides coverage for a specific period, or "term," such as 10, 20, or 30 years. If the insured person passes away during the term of the policy, the beneficiary receives the death benefit. If the insured person outlives the term, the coverage ends, and no benefit is paid.

Unlike Whole life policies, there is no cash value accumulated on a term policy.

• Level Term: The death benefit and premiums remain the same throughout the term.
• Decreasing Term: The death benefit decreases over time, often used to cover specific needs that lessen, like a mortgage.
• Renewable Term: After the term ends, the policy can be renewed for another term, often at a higher premium due to the insured person’s increased age.

Indexed Universal Life (IUL) insurance is a type of permanent life insurance that combines a death benefit with a cash value component. The cash value in an IUL policy is linked to a stock market index (such as the S&P 500) but does not directly invest in the market. Instead, the cash value grows based on the performance of the index, with certain limitations and caps.

• Flexible Premiums: Unlike whole life insurance, IUL policies allow for flexible premium payments. Policyholders can adjust the amount and frequency of their premium payments within certain guidelines, making it more adaptable to changing financial situations.
   
• Cash Value Linked to an Index: The cash value of an IUL grows based on the performance of a stock market index, such as the S&P 500. However, the policyholder does not directly invest in the market. Instead, the cash value is credited with a return based on how the chosen index performs. There is usually a floor (e.g., 0%) to ensure the cash value does not decrease in poor market conditions.