What are the different types of permanent life insurance.

Permanent life insurance like the name suggests, offers long term protection with an inbuilt investment component. There are several types of permanent life insurance designed to suit the needs of various buyers. Since most of these policies are convoluted it would be best to tread carefully and put in the appropriate amount of research before mulling a purchase. The main types of permanent life insurance are

Universal Life Insurance: Thus type of policy has a cash value element that generates a guaranteed income in the form of interest payments over the years. Also this policy is incredibly flexible and the buyer is in complete control of the premium amount allocation. The amount allocated for protection and the part reserved for investments is at the sole discretion of the buyer. Also, the buyer has the flexibility to borrow against the cash value. If you ever find your self in a financial jam the interest can be used to pay the premiums. However, if you do borrow against the cash value and cannot repay the amount you may lose the entire policy amount. Even though you can reduce the premium amount to deal with tough financial situations, you cannot surpass the saving amount entirely because this will cause your policy to lapse.

Whole Life Insurance: Like universal life insurance this type of permanent life insurance also has an intrinsic cash value component. This type of policy is also commonly known as ordinary insurance. The policy stays in effect for the entire lifetime as the name suggests as long as the premiums are being paid by the policy holder. Like other permanent policies the premium amount is divided into two parts one to cover protection costs and the other for investments. The investment part gains value over time making this policy perfect for retirement investment. If you conduct a fair amount of research, you may even be able to find companies that offer dividends or return the excess premium. Even though whole life insurance is more expensive that term life coverage, the numerous benefits and the flexibility that it offers work in its favor.

Variable Life Insurance: This again is a permanent life insurance that provides death benefits as well as investment component. The cash value component will depend on the market conditions and may fluctuate. The cash component is used to invest in stocks, mutual funds and other investment vehicles. So the returns on this type of a policy can be very high in a bear market but if you are caught in the bull run you be exposed to a substantial risk and may see the value of your policy deteriorating. However, there are some companies that minimize the risk on this policy type by offering a guaranteed death benefit amount. You can borrow against the cash value in this type of policy as well.

Variable Universal Life Insurance: This policy entails the benefits and features of both variable and universal life coverage hence the name.

Indexed Universal Life Insurance: In this type of policy the performance of the cash component is linked to a financial index.