Term Life Insurance

• Term life insurance is typically the cheapest form of life insurance available and covers the insured at a predetermined rate for a fixed amount of time, which is called the "term." Once the term of insurance has passed, the agreed upon rate of payment and coverage expires and the former holder of the insurance must either go without coverage or renegotiate a new policy covering a different term. Typically, term insurance is used to offer basic death benefits, such as funeral costs, mortgages, dependent care, etc., for a fixed amount of time, and there is no wealth accumulation that can be cashed in.
  
  

Whole Life Insurance

• Whole life insurance differs from term life in two major ways: it covers a person for their entire life, not just for an agreed upon span of time; and a cash reserve is built up over the years beyond the amount paid as a death benefit, which allows policy holders to accumulate wealth within the life insurance policy that can be cashed in or used as collateral. Whole life insurance requires higher premium payments over the span of the policy than term life, but it guarantees the death benefit, cash value and premium regardless of the performance of the company.
  
  

Universal Life Insurance

• Universal life insurance is similar to whole life insurance in that it covers the policy holder over the span of his entire life, provides a death benefit, and builds a cash value over time that is considered liquid enough to use for investment and collateral purposes. The main difference between the two, however, is that universal life uses a projected premium that is tied to an interest rate that might fluctuate with the insurance company's financial projections. This can cause the cash value to rise and fall with the financial fortune of the company. Death benefits and premiums are also considered more adjustable and flexible along the life of the policy than whole life.
  
  

Variable Life Insurance

• Variable life insurance is a form of whole life insurance that allows policy holders to allocate portions of the monthly premiums to be paid into a variety of investments such as stocks, bonds, equity funds and money market funds. Permanent protection is afforded to the beneficiary upon the death of the person covered by the policy, and the cash value can grow over the life of the policy. However, the policy is not liquid and cash value cannot be withdrawn during the lifetime of the policy holder, plus poorly-performing investments can affect the premiums and cause the fees necessary to keep the policy intact to increase.
  
  

Variable Universal Life Insurance

• Variable universal life insurance is similar to variable life insurance in that it is a life-long form of coverage that offers a death benefit and a wide array of investment opportunities (similar to a mutual fund) that will allow the cash value of the policy to grow over the life of the policy. The main difference between the two is that variable universal life insurance policies are more flexible with the premium amounts that must be paid. Policy holders may choose to change the amount of premiums paid, which could then result in a change in the amount of coverage.