There are four primary different types of life insurance, term, whole life, universal life and variable...

There are four primary different types of life insurance, term, whole life, universal life and variable life. Identify the primary characteristics of each and why someone might choose each type.

Expert Solution

Term life insurance - In this type of insurance, the insured pays a premium for a set term and at the end of the term , the policy also ceases. If the insured passes away in between the end of the tenure, the sum insured is given to the beneficiaries. This insurance is taken to secure the needs of the family upon death of the individual.

Universal life - Universal life insurance offers the insured to pay flexible premiums and includes a minimum premium payment failing which the policy will expire. It also has a cash value attached to it. A premium payer who wants flexibility will want to choose this option.

Adjustable life - It is a combination of term life and universal life insurance. In this the tenure of the life insurance can be adjusted and premiums are flexible. It is also a permanent life insurance which covers so as long as the premiums are paid. It also has a cash option attached.

Variable life insurance - It is similar to a universal fund with an exception that the insured is free to invest the cash value in various securities ,stocks and mutual funds. This helps in appreciation of the investment for an premium holder.

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