Life insurance is divided into two types: term and permanent. Whole life insurance is actually one of four different types of permanent life insurance.
The four types of permanent life insurance are whole life, universal life, variable universal life, and indexed universal life insurance. Each type offers guaranteed cash value growth and a death benefit while lasting until age 80-121.
Different types of whole life insurance
All whole life policies have two main components and they are as stated above death benefit and cash value. Really the only difference is not in the policies so much as it is in how they are marketed: small policies or standard policies.
For the elderly, some companies have guaranteed acceptance whole life which is usually a $50,000 policy or less specifically for final expenses or mortgage protection. These policies are smaller in death benefits in an effort to keep the premiums lower while still offering protection to the family for when the insured passes away.
Standard policies are what get used by the rest of us. These policies are very common for building wealth individually or within a company as they provide tremendous advantages to controlling one’s cash flow.
Universal life
If you need more flexibility with the premiums and the death benefit then universal life could be the option you want to go with. It has cash value just as ordinary whole life but this isn’t quite as much of a focus so the growth is not as significant as whole life would be. Since flexibility is the focus of these policies you could opt to have the cash value at some point be used to pay the premiums, essentially making it into a death benefit only policy (unless sufficient cash value exists to do other things with) as far as how you use it goes that is.
Variable Life insurance
Each of these policies is very similar however what’s different about a variable life policy is that is tied to stocks, bonds, or mutual funds. There is the potential to earn more but you take more risks as well. If it doesn’t perform well then it could decrease both the cash value and death benefit amount. There are some that guarantee the death benefit won’t fall below a certain threshold.
Variable Universal life
This type of policy puts the flexibility of universal life policies in place allowing you to change the premium amount you pay and the death benefit amount as well as tying its growth to investment performance.
What’s the most common permanent life insurance policy
There are many advantages and disadvantages to each of the above types of life insurance. The key to deciding what to get is based entirely on what your circumstances are and how you are trying to use it. That being said the most commonly purchase permanent life insurance option is whole life. I would say that it’s the standard choice while the others are more specialized.
When looking at permanent life insurance most people and businesses do so for the purpose of building cash value with the least possible risk and most guarantee. For those reasons whole life insurance usually fits most accurately the majority of the time.
Conclusion
Whole life insurance is one of four types of permanent life insurance options. You can purchase small whole-life policies that are guaranteed acceptance if you are elderly. However, the same face or death benefit amount is purchasable and depending on circumstances preferable for those who are not elderly.