There are two major types of permanent life insurance: Whole Life and Universal Life.  Each has it's own unique benefits and characteristics.  Whole Life is characterized by it's structured nature.  Universal Life is generally characterized by it's flexibility.

Universal Life - UL

Universal life is characterized by it's flexibility and transparency.  The premiums and death benefit are flexible and can be moved up and down to suit the clients current needs as long as they can qualify.  All internal costs involved in a UL are transparent and can be observed by the insured. 

Their are two sides of a Universal Life policy to which premiums are allocated.  On one side you have the cost of insurance and administration fees.  Whatever is left over after paying the cost of insurance plus administration fees is placed in an interest bearing account.  This account is credited according to the performance of the insurance companies general investment performance.  In properly structured UL's the cash values that accumulate have been used to create guaranteed "paid up" policies, as tax free retirement income, for college funding, as a source of capital to fund a new business, or as an emergency funding source.  A properly structured UL is truly one of the world's most powerful long term savings vehicles.  Providing acceptable levels of safety, return, tax advantages, and liquidity.

During the 80's the account side of UL's were commonly crediting over 10%.  This caused some poorly designed UL's to require more premium than originally illustrated when the agent's did not account for the lower interest rates that have been prevalent since the 80's.  An innovation that has helped prevent such failures is guaranteed UL's.  These are products that give you a guarantee that your policy will stay in force as long as a minimum premium is paid, no matter what the value of the account is.  Guaranteed UL's are the most cost effective way to carry life insurance for the rest of your life, many time costing half of what a traditional Whole Life policy would cost. 

The account portions of UL's enjoy some unique features in that you do not pay taxes on interest accrued, and as long as you keep your policy in force you do not owe taxes on money taken out in the form of withdrawals or loans.  Once this account grows large enough it can be used to pay the policies cost of insurance.  The loan privileges provided on UL are typically at a net rate of 0-5% depending upon the policy.  Usually these loan rates get better after  5-10 years, dropping to a net zero cost on a given policy anniversary date.  It is important to get this as a guaranteed portion of the policy and not stated as current practice if the cash values are intended to be taken as supplemental income or bank loan replacements.  Many of the UL's that CiB carries also come with, or have the option to acquire both of the Accelerated Benefit Riders that are described  under  Accelerated Benefits Rider tab to the left. 

Send an email to aaron@cibflorida.net if you have further questions about UL's nature and uses.

Indexed Universal Life - IUL

IUL has all the same properties and riders as most traditional UL's except the account portion is credited relative to a set of indexes chosen by the insured.  These indexes are not directly invested into securities as is the case in a Variable UL (If you are interested in a Variable UL we can recommend a suitable advisor for you).  These policies provide an opportunity to participate in some of the upside of a major index such as the S&P 500 without the downside.  In other words if the market goes down you get credited a minimum rate, for example 3% is common, and if the market goes up you get a portion of that upturn (12-14% is a common cap limit).  The portion of the upside you are credited is determined by the crediting method you choose.  IUL's also have a fixed account that the policyholder can choose and receive a fixed rate of return much like a traditional UL policy (typically 4%).  An IUL has more risk than a traditional UL but less risk than a Variable UL.  It has more risk in that you normally do not have a fixed return as high as a Traditional UL, but you have the potential to make a higher return if you use the indexed accounts and the index you have chosen (i.e.-S&P 500) does well.  Also, you have less risk than a Variable UL, because if your chosen index goes below zero for the year you have a minimum guaranteed return. 

Whole Life - WL

Whole Life policies were the first type of permanent insurance ever invented and are characterized by their structured nature.  You are given a guaranteed death benefit for a certain premium amount.  Whole life policies typically can be written with an automatic premium loan provision.  This will allow the company to automatically pay your premiums by taking a loan from your cash values.  Typically loan provisions on WL's come with higher interest rates than UL's, usually around 8%.  Participating WL policies can pay you dividends from the company each year that you can use to buy paid up additions of life insurance or add to your cash value.  Most WL policies premiums are approximately double that of a Guaranteed UL.  Some WL's do carry the Accelerated Benefit Riders.  The security, familiarity, and guarantees of Whole Life policies make them the choice of many permanent life insurance buyers.