Q. What are the types of permanent insurance?

A. There are three types of permanent insurance: whole life (sometimes called ordinary life); universal life (often referred to as adjustable life); and variable life. This article explains these different types of life insurance.

Whole Life Insurance (or Ordinary Life Insurance)
Whole life insurance is the most common type of permanent insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.

Universal Life Insurance (or Adjustable Life Insurance)
Universal life insurance allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums or maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy. (To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.

Variable Life
Variable life insurance provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward — stocks, bonds, combinations of both, or accounts that guarantee interest and principal. You will receive a prospectus in conjunction with the sale of this product.

The cash value of a variable life policy is not guaranteed and the policyholder bears the risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. If the specified investments perform poorly, cash values and benefits will drop. Some policies guarantee that death benefits cannot fall below a minimum level. There are both universal life and whole life versions of variable life.

Aug. 31, 2005