Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. This is a great option for individuals who desire a large benefit but have a limited budget. Lastly, term insurance can be customized to include a cash back option, which returns all premiums paid upon reaching the end of the term.
Whole life Insurance is a contract that provides insurance coverage for the contract holder’s entire life. Unlike term life insurance, which covers the contract holder until a specified age limit, a traditional whole life policy never runs out. Whole life insurance does accumulate a cash value which the policyholder can borrow, or surrender his or her policy in exchange for.
Universal life insurance is a flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value build-up. The death benefit, savings element and premiums can be reviewed and altered as a policyholder’s circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.
Indexed universal life insurance is a lot like universal life insurance. An indexed universal life insurance policy gives the policyholder the opportunity to allocate cash value amounts to either a fixed account or an equity index account. Indexed policies offer a variety of popular indexes to choose from, such as the S&P 500 and the Nasdaq 100. Also, these types of universal insurance policies typically guarantee the principal amount in the indexed portion, but cap the maximum return that a policyholder can receive. Since these policies are seen as a “hybrid” universal life insurance policy, they are usually not very expensive, and are safer than an average variable universal life insurance policy.