This is the simplest form of LI provides simple and affordable protection for a specified term of the policy. It’s also called as a pure LI that guarantees payments of a stated fixed death benefit during a specified term. Once expires, the policyholder can renew. When you buy a term life policy, an insurance company promises that it will pay your beneficiaries a set amount if you die during the policy’s term. In exchange, you pay a monthly premium to the company for the duration of that term.

This is a term LI policy provides simple and affordable protection for a specified term of the policy and get money back after term if you outlive. When you buy a return of premium term life policy, an insurance company promises that it will pay your beneficiaries a set amount if you die during the policy’s term.

In exchange, you pay a monthly premium to the company for the duration of that term and if you outlive term period insurance company will return your paid premium without any interest or dividend. Please keep in mind, if you cancel your policy before the end of the term or simply stop paying you might not get any money back, depending on the policy conditions.

The simplest type of permanent LI coverage is whole life (WL). This life insurance policy is providing guarantee to remain in force for the insured’s entire life, provided required premiums are paid. It offers consistent premiums and guaranteed cash value accumulation. But the cash in a whole LI policy will grow slowly. This is because most of the early premium dollars will go towards policy expenses and the insurance costs. However, over the years, the cash in a whole life policy can steadily grow, often with a minimum guaranteed rate of return.

Universal life (UL) is permanent LI with low premiums like term LI and an investment savings component with a flexible premium option. UL premiums consist of two components: a cost of insurance (COI), and a saving factor, known as the cash value. COI of UL is the minimum amount of a premium payment required to keep the policy active.

Indexed Universal Insurance (IUL) is another type of permanent, universal LI product that offers a death benefit with a cash value that can be used to pay policy premiums or take withdrawals and loans. IUL allows the owner to allocate cash value to either a fixed account or an equity index account. Policies offer a variety of well-known indexes such as the S&P 500 or the Nasdaq 100. IUL policies are more volatile than fixed Universal LI, but less risky than variable universal life policies because no money is invested in equity positions.

VUL is also a form of permanent life insurance coverage. It’s most complex to understand and no guaranteed minimum cash value option. These types of life insurance policies offer a death benefit, as well as a cash value based on performance of mutual fund. It’s gives you multiple choice of mutual fund investment option. It is important to understand that while the policyholder can increase their funds based on market movements, their cash is not invested directly in the market. 

Rather, it is invested in “sub-accounts” by the insurance company. This policy has two death benefits options – fixed and variable. With variable, death benefit may go up or down however, it will not go below the set guaranteed amount. You are in control of where your money is invested, you bear the market risk of your investments instead of insurance company  with the high potential to accumulate cash value.