There are several different types of cash value life insurance policies from which to choose. They are all designed to provide living benefits as well as the death benefit.

The principal objective of cash value life insurance is the same as with term insurance: to create an immediate estate should the insured die. The cash value in the policy can also be used to provide a liquid source of income for whatever needs come up, such as a down payment on a home, college funding, or retirement.

• Whole Life Insurance
• Interest Sensitive Life Insurance
• Universal Life Insurance
• Variable Life Insurance

Whole Life Insurance

Whole life insurance offers a number of guarantees. The following are guaranteed with whole life insurance:

• death benefits
• cash values
• level premiums

Sometimes dividends are also guaranteed.

Whole life insurance can be a good tool for long term life insurance needs.

Characteristics of Whole Life Insurance

• Tax-deferred growth of cash value
• Cash values are guaranteed
• Premiums are guaranteed
• Can withdraw or borrow cash value
• Dividends are tax free

Interest Sensitive Whole Life

(Current Assumption Life)

This type of policy is similar to whole life, but it also allows the policy owner to have current interest rates credited to the build-up of cash value inside the policy. It guarantees level premiums and a minimum death benefit. Usually this plan has a fixed premium that is higher in the beginning but may, in a relatively short period of time, "disappear." How quickly the premium "disappears" depends on interest rates and insurance costs.

With an interest sensitive whole life policy, the death benefit must exceed the cash value. As the cash value in the policy increases, the death benefit will also be adjusted if necessary to maintain the insurance policy status.

Characteristics of Interest Sensitive Whole Life

• Level Death Benefit
• Maximum premiums are guaranteed
• Premium payments are fixed
• Interest rates are competitive
• The policyowner can access cash value through loans or surrender

Universal Life

With a Universal Life policy, both premium payments and death benefits can be flexible, within limits.

Universal life starts with term life insurance and then is combined with a tax-sheltered annuity which earns variable rates. When premiums are paid, part of the premium goes to pay for the term insurance and part of the premium is put into a side fund upon which interest is paid.

If the premium paid is not enough to cover the cost of the term life insurance, the additional amount needed is taken from the side fund.

The policyowner has a number of options with regard to premium payments. Within limits, premiums can be adjusted up or down. Premium payments can also be skipped entirely if there is enough cash value in the policy to make the payments.

Characteristics of Universal Life

• Tax-deferred growth of cash value
• Interest rates are competitive
• Access to cash value through loan or withdrawal
• Premiums and death benefit are flexible
• Can pass cash and accumulated earnings to heirs on a tax-free basis

Back to Cash Value Life Insurance-The Basics

Variable Life Insurance

Variable life insurance is a flexible life insurance product.

Variable life insurance has a term insurance foundation and an investment fund. The policyowner gets to choose which type of investment vehicle in which the cash value will be placed. The following are types of investment vehicles from which the policyowner can choose:

• Money Market Account
• Corporate Bond Portfolio
• Common Stock Portfolio
• Government Securities
• Fixed Account

Insurance agents must be licensed by the NASD or the SEC to sell variable products.