Whole life insurance is a type of permanent life insurance and is suitable for a person wanting life insurance cover in place for the rest of their life.

A whole of life policy is guaranteed to pay out the death benefit (sum assured) as long as premiums are paid on time and for the rest of the insured's life. Premiums are paid monthly, quarterly, half-yearly or yearly.

The guarantee of a payout on death by the insurer makes whole of life insurance the most expensive type of policy to buy.

Some permanent life policies have a cash surrender value, whilst others are designed to have no cash value.

Universal life insurance is a type of permanent life insurance, also known as jumbo life insurance, because of the large amount of life cover it provides. A universal life insurance premium is used to pay for the life cover of the policy, with the rest going towards the savings part of the policy which has a cash value.

Universal life policy premiums are typically paid in one lump sum upfront, but most insurers offer a multi-pay option which allows the cost of the insurance premium to be spread over several years. Insurance companies will often allow multi pay premiums to be paid over 2 to 30 years. The life insurance company will charge a higher overall premium if the multi-pay option is chosen to compensate for not receiving all of the premium upfront.

Premium financing for universal life insurance allows the policy owner to finance up to 100% of the policy value. Universal life insurance policies are usually bought by high net worth individuals who want greater choice and flexibility in the investment part of their permanent life insurance policy.

Universal life insurance started in 1979 in the United States of America. The first universal life contract was issued by the Life Insurance Company of California. By the end of 1983, all major American life insurers offered universal life insurance. Today, universal life, or UL as it is also known comes in a variety of different forms and is a major part of the life insurance market.

Universal life insurance (ULI) is a whole-of-life insurance policy that pays out a cash lump sum upon death.

It is a form of permanent life insurance and is designed to provide a death benefit payment.

Indexed universal life insurance is a type of permanent life insurance policy that offers life insurance coupled with a cash account that is linked to stock market returns. The policy premium is invested in an insurance company strategy that is designed to capture the upside potential of stock market investing. Policyholders who choose this option have their policies credited with the growth of a mix of indices selected by the insurance carrier. For example, the S&P 500 and the Hang Seng indices are popular choices for insurers to use. Unlike variable universal life policies, indexed universal life policies are designed to never fall in value simply due to stock market conditions.

Most insurers also offer built-in guaranteed minimum interest rates to these types of policies which add a degree of certainty for buyers of indexed universal life insurance policies.

Like an other permanent life insurance, Indexed universal life insurance has pros and cons. Here are some of the key benefits and disadvantages of indexed UL as its often known as.

Pros

1. Indexed universal life insurance is typically cheaper than standard universal life insurance or traditional whole of life insurance.
2. Exposure to stock market index returns like the S&P 500, Hang Seng and Eurostoxx 50 typically give higher returns than conventional universal life insurance policies.
3. 100% expsoure to market returns gives transpareny on investment returns. Also known as the participation rate.
4. No stock market losses with life insurers providing policyholder with a 0% floor to protect their policy cash value.
5. Minimum guaranteed returns, typically 1% to 2% a year, for the life of the policy offered by the insurer protects policyholders.
6. Annual reset means your policy starting value begins at zero each year. You do not have to make up for stock market losses before benefiting from index gains.
7. Premum payments are flexible meaning policyholders can delay payment of premiums without their policy stopping and leaving them without cover.

Cons

1. Indexed universal life does not offer the same guarantees as some types of whole of life insurance policies. Performance is linked to the indicies the policy tracks which is not guaranteed.
2. Stock market returns are capped by the insurer meaning policyholders don't get all of the index upside. The cap is typically between 7% to 9% per year which is the maximum amount of interest the insurer will credit to your indexed policy.
3. Cap rates can vary from year to year meaning the life insurance company can lower the amount it credits to your policy from the stock market returns it receives.

A guaranteed universal life policy (GUL) is guaranteed to last for the whole of your life. The policy has a cash value which can rise and fall, but a no-lapse guarantee is offered by the insurance company. This means that if the investment performance of the policy reduces the cash value to zero, the policy will continue to provide the death benefit.

Variable universal life insurance is a type of permanent life insurance policy that offers life insurance coupled with an investment account that allows the policy holder to invest in a wide variety of funds and securities. Part of the policy premium is invested into an investment portfolio belonging to the policy with the remaining premium being used to pay for the life cover.

Variable Universal Life (VUL) is a permanent type of life insurance policy, in which the cash value can be invested into shares, bonds and funds. The performance of these underlying investments will determine how good an investment into a variable universal life policy is viewed.

9 factors that decide the performance of a variable univsersal life policy:

1. Investment portfolio risk
2. Higher portfolio running costs
3. Active management of portfolio required
4. More exposure to portfolio volatility
5. No policy cash value guarantees
6. Lower loan to value (LTV) for premium financing the policy
7. Withdrawals and policy loans need more careful management
8. Cost of insurance charged by the insurer
9. Charges by the insurer to run the VUL policy

Money can be taken from the cash value of a universal life insurance policy by way of a withdrawal or a loan. Withdrawals from the cash value of the policy can help provide income in retirement or support other needs of the policy owner. Withdrawals are usually allowed within limits set by the insurer and do not always reduce the life cover. Policy loans can also be taken in order to access the cash value of a life policy. Any loan amount will reduce the death benefit of the universal life policy payout, if it's still in place at the death of the life insured. However, unlike withdrawals, policy loans can be repaid and the full death benefit restored to the policy.

With universal life insurance, you can take out a loan against the cash value of your policy. The policyholder pays back the loan with interest. A loan is typically taken out to cover large expenses such as a property purchase, investment opportunities or to provide liquidity for a business need. The loan can be paid back over time with a lump sum or with regular payments, or it can remain outstanding and interest accumulates within the policy. If the policyholder dies before the loan is paid back, the policy's death benefit pays off the loan.