Both whole life and universal life have cash values. For Whole Life -Picture a rectangle/box with a line from the bottom left corner going up to the top right corner. Everything under the line is your cash value or savings in your life insurance. The entire box is equal to your coverage amount. When you die, your beneficiary gets the box. It doesn't matter how much cash you have, they get the amount of the box. So if you have $50,000 of coverage, and you have $2000 of cash value, when you die they get $50,000 ($2000 of your cash value and the insurance company only has to pay $48,000) If you want to borrow your money, you have to pay it back at a 6-8% interest rate TO THE COMPANY. You borrow your own savings. If you die, they keep your money. And for the first 2-4 years you have your policy, you don't accumulate any cash. Your premiums cover insuance and fees. Universal life is annual renewable term plus a cash value. This gives you an option if your beneficiaries get to collect both your life insuance amount plus the cash or just the life insurance amount. Obviously, no one would choose to NOT get their money, but most don't see the choice. It is made for them. The cost of insurance goes up every year, but your premiums may stay level. Or you can increase them, it's up to you. However, there is a level term where your premiums are locked in and you don't have to worry about the cost going up every year. Eventually with flexible premium universal life, the cost of insurance is so expensive, people can't afford to keep it. The cash value will pay the premiums for only so long before there is no cash left. You're much better off to find a level term, and invest the difference (which you may increase or decrease at will). Once you have enough money saved, and little or no financial obligations (kids, mortgage, debt, etc) get rid of the life insurance. Why pay for life insurance if you have money saved and no responsibilites?
Whole life insurance is a permanent life insurance. Premiums for whole life insurance are generally high and remain status quo throughout the life of the policy owner. Whole life insurance is often seen as an investment as it develops cash value over time. Whole life insurance allows the owner to dip into his insurance through loans or surrender, in times of need.
A flexible universal policy is almost the same as whole life insurance but offers more flexibility for the policy holder. This kind of policy gives the policy owner flexibility to modify the insured amount, or the premiums according to changing circumstances in life.
Variable universal life insurance is not an account. It is a policy that invests in separate accounts in an attempt to earn higher returns than a fixed policy. A variable universal life insurance policy can be converted into a different type of life insurance policy but not a different kind of account.
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