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What Are the Different Types of Permanent Life Insurance Policies?

Whole or ordinary life

This is the most common permanent insurance policy. It offers a death benefit and a savings account. Choosing it means agreeing to pay a specified premium regularly for a specific death benefit. The savings element would grow based on dividends paid by the company.

Universal or adjustable life

This policy offers more flexibility than whole life. You may be able to increase the death benefit by passing a medical exam. The savings vehicle, called a cash value account, generally earns a money market interest rate. Once money accumulates, you may also adjust premium payments as long as enough remains to cover costs. This can be useful if your financial situation suddenly changes. However, if you stop or reduce premiums and savings are depleted, the policy could lapse and coverage end.

Variable life

This policy combines death protection with a savings account that can invest in stocks, bonds, and money market mutual funds. Policy value may grow faster, but risk is greater. If investments perform poorly, cash value and death benefits may decline. Some policies, however, guarantee the death benefit will not fall below a minimum.

Variable universal life

This policy combines universal and variable life features. It carries variable life's investment risks and rewards, along with universal life's ability to adjust premiums and death benefits.