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What is the difference between Whole, Variable and Universal Life Insurance?

Public Comments

1. Too much to answer in this little tiny forum. But, in a nut shell, the guarantees and how the cash value is credited.
2. You have a good answer @nick, but if it was me looking for insurance I would go for a Term Life insurance. It cost less and gives out more value. The only problem with it is, that after the term is up, you no longer have insurance unless you renew it, but at a higher cost, since you are older.
3. These are all forms of permanent "cash value" insurance. The risk is when you die as opposed to if (as in term life). Whole Life is usually sold as a participating policy where you receive dividends according to a scale determined by the insurer. You pay the same premiums every year and the cash vaue returns a fixed amount that is guaranteed over the life of the policy. Universal Life is similar but differs in that the premiums and death benefits are flexible and the guarantees are different and the crediting rate is somewhat variable. Universal Life generally is not sold as a participating policy. There are some other difference in how the policies are administered. Variable Life is similar to UL but the cash value is invested in mutual funds where the policyholder bears the investment risk. You can pay extra for a rider that guarantees a minimum death benefit for example. There is somewhat more flexibility in premiums and benefits.