There are four types of whole life insurance policies: traditional whole life, indexed universal life, variable universal life, and universal life.
Traditional whole life insurance is the original whole life policy. It remains in force for the insured’s entire life, as long as premiums are paid, and pays a death benefit to the beneficiaries when the insured dies. The premium is set when the policy is purchased and does not increase over time.
Indexed universal life insurance is a type of universal life insurance that offers the potential for cash value growth based on the performance of index options, such as the S&P 500. The cash value growth is capped at a predetermined percentage, so there is no risk of loss due to a decrease in the index value.
Variable universal life insurance is a type of universal life insurance that offers the potential for cash value growth based on the performance of investment options, such as stocks, bonds, and mutual funds. The cash value growth is not capped, so there is potential for loss if the investment options perform poorly.
Universal life insurance is a type of permanent life insurance that offers the potential for cash value growth. The cash value can be used to pay the premiums, which can increase the death benefit and prolong the policy.