is a policy that provides life insurance protection for a specified term or period of time – typically from 1 to 30 years or until a specified age. Term life insurance provides a death benefit only with no build up of cash value. Thus, term insurance is the least expensive and most straight forward of all life insurance policies.
Whole Life Insurance is a policy that provides life insurance protection throughout the life of the insured as long as the premium is paid when due. The premium may be level or increase after a fixed period, but it will not change from the premium schedule provided when the policy was purchased. Part of each premium payment is applied to the policy’s cash value account, which grows on a tax deferred basis. In addition to providing guaranteed premiums, death benefits and cash value, whole life policies may also pay policy dividends in some cases. As a result of these additional benefits whole life policies are substantially more expensive than term life policies.
Universal Life Insurance is a policy that provides life insurance very similar to whole life policies with the exception that there is flexibility with regard to the premium and amount of insurance provided, allowing the insured to change these amounts within certain guidelines. Because of this fact the policy may not be permanent if the policyholder under-funds the policy by not paying full premiums.