The Four Chief Types of Life Insurance
By Evan Davis
Life insurance, at its core, is a means to protect the financial security of one's survivors. It is generally thought of as a way to provide income replacement for a wage earner's survivors in the event of death. Life is purchased from an insurer by making regular payments of premiums during the life of the insured. Upon the death of the insured, designated beneficiaries receive a financial benefit.

Although all life policies maintain those consistent characteristics, there are different means to achieving the same end. Four distinct types of life have been developed and are in common usage.

*Term Life Insurance

Term life is probably the most basic form of life insurance. Term is purchased for a specific period of time (the term). The length of the term can vary considerably. There are term policies that are effective for well over twenty years, whereas some only involve a one-year term. A regular premium is paid throughout the term. If the insured dies at any point during the term, the designated beneficiary receives the death benefit. If one survives the term, however, there is no payout and the policy simply ends.

*Whole Life Insurance

Whole life has a long history and maintains great popularity. The cost of premiums is guaranteed for the entire time the policy in place. As premiums are paid, the insured accumulates a cash value for the policy, with the insurer determining the interest rate applied to that cash value. One may either "cash out" their whole life policy, or

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maintain it so that benefits are paid to survivors upon the policyholder's death. Whole life policies were long "the norm" in the industry.

*Universal Life Insurance

Universal Life is considered a more flexible approach to life insurance. The required regular premium amount can vary as long as the policy has a cash value in excess of the policy's costs. The insured can alter the policy's future payout while the policy remains in force, making it a flexible solution for those who may have more complicated or rapidly-changing needs than can be addressed with term or whole life solutions.

*Variable Universal Life Insurance

Variable Universal Life takes the flexibility of universal life coverage and adds to it by providing investment choices. The policy's cash value is not based simply on an interest rate determined by the insurer. Instead, the policy's value is based upon the performance of various investments. The insured allocates his premiums among a series of investment options with a variable universal life policy.

Although all policies do share common characteristics, the four different types of policies have some marked differences. Each type of policy has advantages and limitations. For some, a simple term policy will more than suffice to meet their life needs. Others may benefit considerably from a more full-featured policy that includes an investment component and the ability to alter the nature of benefits and the premium.
Evan Davis works in Medicare customer service and is the webmaster and owner of A2B Life Insurance, where you can fine fast, no medical exam life insurance and low cost life insurance premiums

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