Life Insurance

Types of Life Insurance

A Life Insurance policy is a legal contract between an insurer and a policyholder, where the policyholder pays premiums in exchange for a sum of money that upon the insured's death, will flow to a named beneficiary. Generally, there are two major types of life insurance. Although, there are others:

  • Term
  • Permanent
  • Whole Life (Traditional & Variable)
  • Current Assumption Universal Life
  • Guaranteed Universal Life
  • Indexed Universal Life
  • Variable Universal Life

Each product type has unique features related to the premium, cash value, death benefit, and other features that are associated with more or less risk and are appropriate for different planning scenarios and different types of clients.

Key Terms

Premium Payments:

A premium payment is an amount of money that one must pay for an insurance policy. The amount depends on numerous factors including age, health status, amount and type of coverage and may be fixed or flexible.

Death Benefit:

The death benefit is the amount payable to the named beneficiary when the insured passes away, assuming sufficient premiums have been paid. It can vary in terms of size and structure depending on the type of life insurance contract held, and it is generally exempt from ordinary income tax.

Cash Value:

For some types of insurance policies, a cash value may accumulate tax-deferred as a result of the combination of premiums paid and investment performance or crediting rate. Additionally, some policies may allow for loans, surrenders or withdrawals with regard to the cash value subjectto additional considerations.


A partial surrender of cash value resulting in reduced net cash value and generally a reduced death benefit.


An amount borrowed from the cash value at a specifiedinterest rate that must be repaid or if not repaid, will be deducted from the policy's death benefit and may cause a taxable event.


A withdrawal of the total cash value from the policy at the owner's request. A complete surrender will result in payment to the owner of any remaining net surrender value and willterminate all coverage under the Policy.