There are four types of permanent life insurance: whole life, universal life, indexed universal life, and variable universal life.
Whole life insurance is the original life insurance policy. It remains in force for your entire life, as long as you continue to pay the premiums. The death benefit and the cash value of the policy grow at a fixed rate.
Universal life insurance is similar to whole life, but the cash value growth is not fixed. It is based on the performance of the underlying investments in the policy.
Indexed universal life insurance combines features of whole life and universal life. The cash value growth is based on the performance of a stock market index, such as the S&P 500, with a floor and a ceiling.
Variable universal life insurance also combines features of whole life and universal life. The cash value growth is based on the performance of underlying investments, which can be stocks, bonds, or mutual funds. However, these investments are subject to market risk, so the cash value can go up or down.
All four types of permanent life insurance have a death benefit. They also have a cash value, which grows tax-deferred. You can access the cash value through loans or withdrawals. Loans will reduce the death benefit, while withdrawals will not.
